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The Role of Financial Advisors in M&As: Do Domestic and Foreign Advisors Differ?

In: HANDBOOK OF FINANCIAL ECONOMETRICS, MATHEMATICS, STATISTICS, AND MACHINE LEARNING

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  • Kai-Shi Chuang

Abstract

This study investigates the role of financial advisors on the influence of deal outcomes in M&As. In particular, this study examines whether firms hired by domestic financial advisors can outperform those by foreign counterparts. Using 333 targets and 949 bidders from 1995 to 2011, the results show that targets take more (less) time to complete the deals when hiring low-reputable (foreign) financial advisors. When bidders hire low-reputable financial advisors and foreign advisors, bidders can complete the deals faster. In addition, the evidence indicates that low-reputable financial advisors create higher gains to both targets and bidders around the announcement date. However, bidders hired by less prestigious financial advisors suffer larger losses during post-announcement period. Interestingly, when hiring domestic advisors, both targets and bidders obtain higher announcement returns. The regression analysis further reveals that bidders obtain higher post-announcement returns when bidders hire domestic advisors. Hence, this study reveals that domestic advisors play an important role in M&As.

Suggested Citation

  • Kai-Shi Chuang, 2020. "The Role of Financial Advisors in M&As: Do Domestic and Foreign Advisors Differ?," World Scientific Book Chapters, in: Cheng Few Lee & John C Lee (ed.), HANDBOOK OF FINANCIAL ECONOMETRICS, MATHEMATICS, STATISTICS, AND MACHINE LEARNING, chapter 76, pages 2565-2597, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811202391_0076
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    More about this item

    Keywords

    Financial Econometrics; Financial Mathematics; Financial Statistics; Financial Technology; Machine Learning; Covariance Regression; Cluster Effect; Option Bound; Dynamic Capital Budgeting; Big Data;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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