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Does relationship matter? The choice of financial advisors

Listed author(s):
  • Francis, Bill B.
  • Hasan, Iftekhar
  • Sun, Xian

This study evaluates whether and how relationships influence acquirers’ choice of financial advisors in mergers and acquisitions (M&As). Specifically, it examines how acquirers’ relationships with their advisors, including their optimism of analyst recommendations and the outcome of their past services, determine the choice of advisors in current transaction. Findings suggest that banking relationships have significant yet limited influence on a firm's choice of M&A advisor. The evidence reveals that firms without recent M&A experience are more likely to choose their underwriters as financial advisors in stock-paid deals, especially when they provide overly optimistic analyst coverage prior to the transactions. Firms with recent M&A experience, however, are more likely to switch financial advisors with poor outcomes in past deal(s).

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File URL: http://www.sciencedirect.com/science/article/pii/S0148619513000866
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Article provided by Elsevier in its journal Journal of Economics and Business.

Volume (Year): 73 (2014)
Issue (Month): C ()
Pages: 22-47

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Handle: RePEc:eee:jebusi:v:73:y:2014:i:c:p:22-47
DOI: 10.1016/j.jeconbus.2013.12.002
Contact details of provider: Web page: http://www.elsevier.com/locate/jeconbus

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