Group polarization on corporate boards

Theory and evidence on board decisions about acquisition premiums

Research output: Contribution to journalArticle

52 Citations (Scopus)

Abstract

This study investigates how a fundamental group decision-making bias referred to as group polarization can influence boards' acquisition premium decisions. The theory suggests that when prior premium experience would lead directors on average to support a relatively high premium prior to board discussions, they will support a focal premium that is even higher after discussions; but when directors' prior premium experience would lead them on average to support a relatively low premium prior to board discussions, they will support a focal premium that is even lower after discussions. Results provided strong support for the theory. Moreover, group polarization was reduced by demographic homogeneity among directors and by minority expertise but increased by board influence. This study introduces a fundamental group decision-making bias into governance research and explains how group processes can influence network diffusions.

Original languageEnglish (US)
Pages (from-to)800-822
Number of pages23
JournalStrategic Management Journal
Volume34
Issue number7
DOIs
StatePublished - Jul 2013

Fingerprint

Premium
Group polarization
Corporate boards
Decision-making bias
Group decision making
Group processes
Demographics
Homogeneity
Governance
Expertise
Minorities

Keywords

  • board of directors
  • corporate governance
  • group dynamics
  • group polarization
  • interlock network diffusion

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management

Cite this

Group polarization on corporate boards : Theory and evidence on board decisions about acquisition premiums. / Zhu, Hongquan.

In: Strategic Management Journal, Vol. 34, No. 7, 07.2013, p. 800-822.

Research output: Contribution to journalArticle

@article{81dfc601888844d3bb086a402d4962bc,
title = "Group polarization on corporate boards: Theory and evidence on board decisions about acquisition premiums",
abstract = "This study investigates how a fundamental group decision-making bias referred to as group polarization can influence boards' acquisition premium decisions. The theory suggests that when prior premium experience would lead directors on average to support a relatively high premium prior to board discussions, they will support a focal premium that is even higher after discussions; but when directors' prior premium experience would lead them on average to support a relatively low premium prior to board discussions, they will support a focal premium that is even lower after discussions. Results provided strong support for the theory. Moreover, group polarization was reduced by demographic homogeneity among directors and by minority expertise but increased by board influence. This study introduces a fundamental group decision-making bias into governance research and explains how group processes can influence network diffusions.",
keywords = "board of directors, corporate governance, group dynamics, group polarization, interlock network diffusion",
author = "Hongquan Zhu",
year = "2013",
month = "7",
doi = "10.1002/smj.2039",
language = "English (US)",
volume = "34",
pages = "800--822",
journal = "Strategic Management Journal",
issn = "0143-2095",
publisher = "John Wiley and Sons Ltd",
number = "7",

}

TY - JOUR

T1 - Group polarization on corporate boards

T2 - Theory and evidence on board decisions about acquisition premiums

AU - Zhu, Hongquan

PY - 2013/7

Y1 - 2013/7

N2 - This study investigates how a fundamental group decision-making bias referred to as group polarization can influence boards' acquisition premium decisions. The theory suggests that when prior premium experience would lead directors on average to support a relatively high premium prior to board discussions, they will support a focal premium that is even higher after discussions; but when directors' prior premium experience would lead them on average to support a relatively low premium prior to board discussions, they will support a focal premium that is even lower after discussions. Results provided strong support for the theory. Moreover, group polarization was reduced by demographic homogeneity among directors and by minority expertise but increased by board influence. This study introduces a fundamental group decision-making bias into governance research and explains how group processes can influence network diffusions.

AB - This study investigates how a fundamental group decision-making bias referred to as group polarization can influence boards' acquisition premium decisions. The theory suggests that when prior premium experience would lead directors on average to support a relatively high premium prior to board discussions, they will support a focal premium that is even higher after discussions; but when directors' prior premium experience would lead them on average to support a relatively low premium prior to board discussions, they will support a focal premium that is even lower after discussions. Results provided strong support for the theory. Moreover, group polarization was reduced by demographic homogeneity among directors and by minority expertise but increased by board influence. This study introduces a fundamental group decision-making bias into governance research and explains how group processes can influence network diffusions.

KW - board of directors

KW - corporate governance

KW - group dynamics

KW - group polarization

KW - interlock network diffusion

UR - http://www.scopus.com/inward/record.url?scp=84878304595&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84878304595&partnerID=8YFLogxK

U2 - 10.1002/smj.2039

DO - 10.1002/smj.2039

M3 - Article

VL - 34

SP - 800

EP - 822

JO - Strategic Management Journal

JF - Strategic Management Journal

SN - 0143-2095

IS - 7

ER -