Watchdogs or friends? CEO-audit committee ties and M&A performance

We examine the association between CEO-audit committee social ties and merger and acquisition (M&A) performance. Using a sample of 11,028 M&A transactions by U.S. listed acquirers over 1999-2022, we find that CEO-audit committee ties are significantly associated with lower acquirer announcement returns, higher bid premiums, and longer deal completion times. These associations are consistent with the view that compromised audit committee monitoring coincides with greater CEO expropriation during the M&A process and reduced accountability for poor post-acquisition performance. Cross-sectional analyses indicate that these patterns are concentrated in settings with higher information asymmetry between acquirer and target and in firms with weaker alternative governance mechanisms. We also document a contrasting pattern for CEO ties with strategy committees, which are positively associated with M&A outcomes. Taken together, our findings support a role-dependent view of director independence: the governance implications of CEO-director social ties depend on whether directors occupy monitoring- versus advisory-oriented positions.