University at Buffalo School of Management

Buffalo Business - Autumn 2014

The magazine for alumni and friends of the UB School of Management

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Corporations with board directors who have investment banking experience are more likely to acquire other businesses—and make better acquisitions when they do—according to a new study from the School of Management. Published in the May 2014 issue of the Journal of Financial Economics, the study found that directors with investment banking experience help their firms to select better busi- nesses to acquire, more accurately determine the value of the target business and either reduce reliance on mergers and acquisition con- sultants or negotiate lower advisory fees. "We found that, all other things being equal, firms with investment banking directors on the board are more than 13 percent more likely to make acquisitions the following year," says study co-author Feng (Jack) Jiang, assistant professor of finance and managerial economics. "Relevant experience and financial literacy are important when serving on corporate boards." The study defined investment banking directors as outside directors—a nonemployee member of a company's board of directors— who had past or concurrent working experience as either top executives or senior managers at one of the most active mergers and acquisitions advising firms. It used a sample of more than 41,000 firm-year observations from 1998 to 2008 and found a positive relationship between the presence of investment banking directors and the firm's probability of making acquisitions. In addition, the research examined whether corporate boards with investment banking directors make better acquisitions than those without. Using a sample of nearly 2,500 acquisitions announced from 1999 to 2008, the study found that firms with investment banking directors are associated with 0.8 per- cent higher abnormal announcement returns, which translates to $36 million in increased value for shareholders. These findings are counter to a 2008 study by Güner, Malmendier and Tate that found that the presence of investment bankers on boards was associated with worse acquisitions. Jiang collaborated on the study with Qianqian Huang, assistant professor, City University of Hong Kong; Erik Lie, Henry B. Tippie Research Professor of Finance and departmental executive officer, University of Iowa Henry B. Tippie College of Business; and Ke Yang, assistant professor, Lehigh University. x Maynes honored with teaching award Timothy Maynes, assistant professor of organization and human resources, received the Milton Plesur Excellence i n Te a c h i n g Aw a r d from the undergraduate Student Association in a ceremony this spring. Named for a beloved history professor who died in 1987, the annual award recognizes outstanding professors who create an atmos- phere of creativity, enthusiasm and participa- tion in their classrooms. Students nominate instructors who have inspired, excited or posi- tively affected them from across the university. Maynes joined the faculty last year after earning his PhD from Indiana University. He also holds master's and bachelor's degrees from Brigham Young University. x New book offers financial advice for when we 'get stupid' Baby boomers can learn how to pro- tect their hard-earned assets and guarantee a steady income for the rest of their lives through a new book by Lewis Mandell, professor emeritus of finance and manageri- al economics. According to What to Do When I Get Stupid: A Radically Safe Approach to a Difficult Financial Era, financial reasoning usually peaks around age 53 and then declines sharply, especially after age 70. More troubling, Mandell finds financial confidence increases at this stage, leaving many seniors susceptible to risky sales pitches and bad investments. Mandell, author of 22 books on consumer finance, says aging workers and retirees must act today to safeguard their finances against volatile markets and their own poor decisions. "A fully paid, age-in-place home may be the single best investment we can make," he News about faculty and their research. B B Autumn 2014 Maynes Investment bankers lead businesses to better mergers, acquisitions I n s i g h t s

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