Outside board monitoring and the economic outcomes of acquisitions: a test of the substitution hypothesis

In this work, we examine the effects of outside board monitoring on acquisition outcomes in a setting of limited ownership control structure (within manager-controlled firms). We also analyze the effects of outside directors on acquisition outcomes in the context of significant ownership control structures (within owner-controlled and owner-manager-controlled firms). Our findings support the substitution hypothesis. That is, outside board monitors influence the economic outcomes of acquisitions of manager-controlled enterprises, but not the outcomes of owner-controlled or owner-manager-controlled firms.