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Investment banks advising takeover targets

Listed author(s):
  • Qingzhong Ma

    ()

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    Should takeover target firms hire top-tier investment bank advisors? For a sample of mergers and acquisitions between publicly traded U.S. acquirers and targets, in deals in which targets hire top-tier banks, targets earn higher premiums and abnormal returns; the probability of stock payment is lower, especially when bidder stock is potentially overvalued; acquirers, however, do not necessarily earn lower abnormal returns, and combined returns are higher. Controlling for self-selection does not erode, but, in some cases even strengthens the results. The evidence suggests that top-tier investment banks advising targets benefit shareholders of client firms by making better deals, instead of simply bargaining against the acquirers. The findings shed light on the role of advisor incentives when linking advisor quality and shareholder wealth. Copyright Springer Science+Business Media, LLC 2013

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    File URL: http://hdl.handle.net/10.1007/s12197-011-9192-9
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    Article provided by Springer & Academy of Economics and Finance in its journal Journal of Economics and Finance.

    Volume (Year): 37 (2013)
    Issue (Month): 3 (July)
    Pages: 339-374

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    Handle: RePEc:spr:jecfin:v:37:y:2013:i:3:p:339-374
    DOI: 10.1007/s12197-011-9192-9
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