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The international diversification of banks and the value of their cross-border M&A advice

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  • De Jong, Abe
  • Ongena, Steven
  • van der Poel, Marieke

Abstract

This paper investigates the effects of international diversification of banks on the value of their M&A advice. We study bidder returns to 1,253 cross-border M&A announcements. We find that acquirers engaging a more internationally diversified financial advisor generate lower excess returns. Acquirers benefit most from advisors with a greater focus on their home country. These results suggest that the benefits of advisors’ international diversification related to greater economies of scale and scope and the flexibility of allocating deals to the most skilled employee do not outweigh the costs emanating from a lack of country-specific knowledge and greater conflicts of interest.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7735.

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Date of creation: Mar 2010
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Handle: RePEc:cpr:ceprdp:7735

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Keywords: Advisor Choice; Bank Diversification; Cross-Border Mergers and Acquisitions;

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  15. Bao, Jack & Edmans, Alex, 2009. "Do Investment Banks Have Skill? Performance Persistence of M&A Advisors," Working Paper Series 2009-14, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
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