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The Valuation Impact of Financial Advisors: An Empirical Analysis of REIT Mergers and Acquisitions

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  • Kenneth Daniels
  • Richard Phillips

Abstract

This paper analyzes the effect of financial advisor-monitors on the valuation of real estate investment trust (REIT) mergers. Advisor choice determinants and the effect of advisors on transaction value are examined using a sample of REIT mergers for the 1981 to 2001 period. A two-stage target firm pricing model is estimated: the first stage (logit) estimates the probability of advisor use and the second stage analyzes the effect of advisors on target firm valuation. The results indicate that financial advisor monitoring, possibly by reducing information asymmetries, has significant positive effects on the value of REIT acquisitions.

Suggested Citation

  • Kenneth Daniels & Richard Phillips, 2007. "The Valuation Impact of Financial Advisors: An Empirical Analysis of REIT Mergers and Acquisitions," Journal of Real Estate Research, Taylor & Francis Journals, vol. 29(1), pages 57-74, January.
    • Handle: RePEc:taf:rjerxx:v:29:y:2007:i:1:p:57-74
    DOI: 10.1080/10835547.2007.12091189
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    1. Willard McIntosh & Dennis T. Officer & Jeffrey A. Born, 1989. "The Wealth Effects of Merger Activities: Further Evidence from Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 4(3), pages 141-156.
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    6. Allen, Paul R. & Sirmans, C. F., 1987. "An analysis of gains to acquiring firm's shareholders : The special case of REITs," Journal of Financial Economics, Elsevier, vol. 18(1), pages 175-184, March.
    7. Brown, David T & Ryngaert, Michael D, 1991. "The Mode of Acquisition in Takeovers: Taxes and Asymmetric Information," Journal of Finance, American Finance Association, vol. 46(2), pages 653-669, June.
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    9. Robert D. Campbell & Chinmoy Ghosh & C. F. Sirmans, 2001. "The Information Content of Method of Payment in Mergers: Evidence from Real Estate Investment Trusts (REITs)," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 29(3), pages 361-387, March.
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    Cited by:

    1. Su Han Chan & Ko Wang & Jing Yang, 2009. "IPO Pricing Strategies with Deadweight and Search Costs," Journal of Real Estate Research, American Real Estate Society, vol. 31(4), pages 481-542.
    2. Chen, Hsuan-Chi & Ho, Keng-Yu & Weng, Pei-Shih & Yeh, Chia-Wei, 2020. "The role of equity underwriting relationships in mergers and acquisitions," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    3. Yiannis Anagnostopoulos & George Alexandrou & Hardy M. Thomas, 2024. "European banking M&As: The role of financial advisors," Review of Quantitative Finance and Accounting, Springer, vol. 63(4), pages 1193-1231, November.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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