When Boardroom Ties Help or Hurt: Performance Feedback and M&A Outcomes

Research on CEO-board informal ties has produced conflicting findings. We integrate dominant coalition and performance feedback theories to resolve this puzzle. We argue that when performance exceeds aspirations, ties facilitate coalitional entrenchment—tied directors shift from evaluation to endorsement—hindering value-creating acquisitions. When performance falls below aspirations, signal clarity legitimizes critical input, with ties enabling candid deliberation and value-creating acquisitions. However, this benefit is contingent on tied directors not dominating the board. Using a panel of 1,404 U.S. firms, we find support for our hypotheses. Our study demonstrates how informal ties shape M&A performance in response to performance feedback.