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The information role of advisors in mergers and acquisitions: Evidence from acquirers hiring targets’ ex-advisors

Version 2 2024-06-18, 05:23
Version 1 2017-11-30, 13:54
journal contribution
posted on 2024-06-18, 05:23 authored by X Chang, C Shekhar, LHK Tam, J Yao
We examine the information role of financial advisors by focusing on mergers and acquisitions in which acquiring firms hire target firms’ ex-advisors. We document that by employing targets’ ex-advisors, acquirers pay lower takeover premiums and secure a larger proportion of merger synergies. The corresponding targets exhibit lower announcement returns and are less likely to be propositioned by competing bidders. These results indicate that acquirers take advantage of value-relevant information about targets through targets’ ex-advisors, and achieve bargaining advantages in deal negotiations. In contrast, we document no discernible value effects when targets hire acquirers’ ex-advisors, suggesting that the information role of acquirers’ ex-advisors hired by targets is weaker than that of targets’ ex-advisors hired by acquirers.

History

Journal

Journal of banking and finance

Volume

70

Pagination

247-264

Location

Amsterdam, The Netherlands

ISSN

0378-4266

Language

eng

Publication classification

C Journal article, C1.1 Refereed article in a scholarly journal

Copyright notice

2016, Elsevier

Publisher

Elsevier