Journal article
The information role of advisors in mergers and acquisitions: Evidence from acquirers hiring targets’ ex-advisors
X Chang, C Shekhar, LHK Tam, J Yao
Journal of Banking and Finance | ELSEVIER SCIENCE BV | Published : 2016
Abstract
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, sugge..
View full abstractGrants
Awarded by National Natural Science Foundation of China
Funding Acknowledgements
The authors thank Carol Alexander (Editor), Thomas Bates, David Becher, Espen Eckbo, Mark Humphery-Jenner, Alexander Ljungqvist, Jordan Neyland, Micah Officer, David Yermack, an anonymous referee, and four anonymous investment bankers for helpful comments and suggestions. We also thank participants at the EFMA 2013 and FMA 2013 for helpful comments. We also thank Yuanfang Chu and Chia Mei Shih for excellent research assistance. Chang acknowledges financial support from Rega Capital Management Limited and Academic Research Fund Tier 1 provided by Ministry of Education (Singapore). An important part of research was done when Chang was a distinguished visiting professor at Jilin University of Finance and Economics. Tam acknowledges research grant (MYRG2015-00059-FBA) and conference grant (CG008-FBA2016) supports from University of Macau. Yao acknowledges research funding supported by the Fundamental Research Funds for the Central Universities (#20720151145) and the National Natural Science Foundation of China (#71502152). All errors are our own.