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Information Transmission between Banks and the Market for Corporate Control

Author

Listed:
  • Christian Bittner

    (Deutsche Bundesbank and Goethe University Frankfurt)

  • Falko Fecht

    (Deutsche Bundesbank and Frankfurt School of Finance & Management)

  • Melissa Pala

    (Deutsche Bundesbank)

  • Farzad Saidi

    (University of Bonn and CEPR)

Abstract

This paper provides evidence of deliberate private-information disclosure within banks' international business networks. Using supervisory trade-level data, we show that banks with closer ties to a target advisor in a takeover buy more stocks of the target firm prior to the deal announcement, enabling them to benefit from the positive announcement return. We do not find such effects for bank connections to acquirer advisors or for trades in acquirer stocks. Target advisors benefit from leaking information about takeover bids to connected banks, as it drives up the premium paid without compromising the probability of bid success.

Suggested Citation

  • Christian Bittner & Falko Fecht & Melissa Pala & Farzad Saidi, 2023. "Information Transmission between Banks and the Market for Corporate Control," ECONtribute Discussion Papers Series 250, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:250
    as

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    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_250_2023.pdf
    File Function: First version, 2023
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    References listed on IDEAS

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    More about this item

    Keywords

    bank networks; trading; information spillovers; mergers and acquisitions; syndicated lending;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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