Are good financial advisors really good? The performance of investment banks in the M&amp;A market

Ismail, Ahmad

doi:10.1007/s11156-009-0155-6

Cited by 57 publications

(52 citation statements)

References 24 publications

(45 reference statements)

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“…Rau (2000) documents no association between the quality of investment bank and acquirer announcement returns. In line with these, McLaughlin (1992), Hunter and Jagtiani (2003) and Ismail (2010) report higher premia paid and lower announcement day returns for bidders using tier-one investment bank advisors, as opposed to the tier-two. For acquirers advised by tier-one advisors, the loss in the market value on the announcement day is more than $42 billion (Ismail 2010).…”

Section: Manda Financial Advisory Market: Prior Literaturementioning

confidence: 81%

“…In line with these, McLaughlin (1992), Hunter and Jagtiani (2003) and Ismail (2010) report higher premia paid and lower announcement day returns for bidders using tier-one investment bank advisors, as opposed to the tier-two. For acquirers advised by tier-one advisors, the loss in the market value on the announcement day is more than $42 billion (Ismail 2010). Allen et al (2004) Raman, Shivakumar, and Tamayo (2013) document that targets' low quality earnings are associated with higher offer premium.…”

Section: Manda Financial Advisory Market: Prior Literaturementioning

confidence: 81%

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How Accounting Firms Compete for Financial Advisory Roles in the M&A Market

Bilinski

Yim

2015

SSRN Journal

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Abstract. Thomson Reuter's quarterly rankings consistently place accounting firms among top ten financial advisors on mergers and acquisitions (M&A) in the mid-and low-end of the market. We propose that accounting firms lever their audit expertise to produce fairer target valuations, particularly in industries where the auditor specializes, and when the target has low reporting quality. These competitive strengths of accounting firms translate into tangible gains for bidders as transactions advised by accounting firms have (1) higher announcement day price reactions compared to deals with investment-bank financial advisors, (2) a lower likelihood the acquirer overpays for the target, and (3) a lower likelihood the deal will not complete. These acquirer benefits translate into more repeat business for accounting firms as they are more likely to advise on subsequent transactions. (JEL G34, M41, M49)

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Section: Manda Financial Advisory Market: Prior Literaturementioning

confidence: 81%

Section: Manda Financial Advisory Market: Prior Literaturementioning

confidence: 81%

How Accounting Firms Compete for Financial Advisory Roles in the M&A Market

Bilinski

Yim

2015

SSRN Journal

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“…A growing body of literature has examined the effects of financial advisors in mergers and acquisitions (e.g., Servaes and Zenner, 1996;Hunter and Jagtiani, 2003;Ismail, 2009;Schiereck et al, 2009;Wang and Whyte, 2010;Golubov et al, 2011). For 2 Rau (2000) classifies the top five banks in any signal year as first-tier banks.…”

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confidence: 99%

“…4 example, Wang and Whyte (2010) report that bidders that use investment banks in mergers and acquisitions on average obtain lower gains than those that do not use investment banks. However, Golubov et al (2011) report that bidders obtain higher gains in public acquisitions when hiring top-tier advisors, and Ismail (2009) However, prior empirical studies mainly focus on industrial firms. As financial firms, such as banks, operate in a highly regulated industry, the deals would draw much attention from the public and the government.…”

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confidence: 99%

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Financial advisors, financial crisis, and shareholder wealth in bank mergers

Chuang

2014

Global Finance Journal

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This study investigates whether the quality of investment banks impacts shareholder wealth in bank mergers. Focusing on a US sample of 415 targets and 1,066 bidders from 1995 to 2010, we find that the quality of financial advisors appears to have a significant impact on shareholder wealth for bidding firms, but not for target firms. Our results find that bidders experience higher losses when hiring tier-1 advisors. Interestingly, further analysis shows that this finding holds during 'normal' periods, but not during the crisis (1997-1999 and 2007-2009) periods. With a significant negative relationship between tier-1 advisors and bidder announcement returns in the regression analysis, our results suggest that more prestigious financial advisors lead to larger losses for bidders in bank mergers. The results suggest overpayment by bidders when hiring more prestigious financial advisors in bank mergers. Our results also indicate the importance of financial advisors to bidder shareholder wealth.EFM classification: G160

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External sources of political connections: Financial advisors and Chinese acquisitions

Wang

2018

Int. J Fin Econ

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This study considers the effects of an external form of political connection, namely, politically connected financial advisors, on the value creation of Chinese acquiring firms over the period 2004–2014. Using data consisting of 1,623 Chinese mergers and acquisitions (M&As) deals, we show that politically connected financial advisors create significantly higher market value for acquiring firms, after controlling for firms' own political connections and reputation. Further analysis indicates that the appointment of political advisers can improve an acquiring firm's long‐term industry‐adjusted operating performance and help acquirers reduce bid premiums. We show that private firms and stock‐pay acquisitions are more likely to appoint politically connected financial advisors in M&A transactions, whereas our findings remain unchanged after controlling for endogeneities.

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Are good financial advisors really good? The performance of investment banks in the M&A market

Abstract: Investment banks, Prestigious, Gains, Mergers and acquisitions, G34,

Cited by 57 publications

References 24 publications

How Accounting Firms Compete for Financial Advisory Roles in the M&A Market

How Accounting Firms Compete for Financial Advisory Roles in the M&A Market

Financial advisors, financial crisis, and shareholder wealth in bank mergers

External sources of political connections: Financial advisors and Chinese acquisitions

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