Home preference at selecting financial advisors in cross-border M&As
AbstractThis paper examines the determinants of the choice of financial advisors and their impact on the announcement effects of US acquirers in cross-border M&As. Two hypotheses are tested: one pertains to the acquiring firms’ home preference in selecting financial advisors, and the other relates to advisors’ experience in target countries. Evidence supports the home preference hypothesis in the selection of advisors in cross-border M&As, particularly in all-cash paid transactions where acquirers take the entire risk of not realizing the expected synergy value. We also observe home preference among investors as acquirers that picked US advisors experience significantly higher positive abnormal returns in all-cash paid transactions than those without US advisors, even when the chosen US advisors do not have significant experience in the target country. Finally, home preference at the choice of financial advisor may be costly if US acquirers pass by more experienced because of home preference.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 31/2012.
Length: 48 pages
Date of creation: 29 Oct 2012
Date of revision:
financial advisors; certification; payment method; cross border mergers and acquisitions;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
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