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The role of investment banks in M&A transactions: Fees and services

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  • Walter, Terry S.
  • Yawson, Alfred
  • Yeung, Charles P.W.

Abstract

We examine the pricing and performance of advisers in M&A transactions. We determine adviser quality on the basis of a contemporaneous market share measure and show that high quality advisers receive higher M&A advisory fees. High quality advisers also complete deals faster, but their superiority is not reflected in increasing the likelihood of deal completion or delivering greater abnormal equity returns to their clients. It is well known that stock bids are received more negatively than cash bids, so we further partition the sample of acquirers by consideration type and examine the abnormal returns of each partition. We find that high quality investment banks are able to differentiate themselves by delivering greater abnormal returns to their acquirer clients in deals involving stock.

Suggested Citation

  • Walter, Terry S. & Yawson, Alfred & Yeung, Charles P.W., 2008. "The role of investment banks in M&A transactions: Fees and services," Pacific-Basin Finance Journal, Elsevier, vol. 16(4), pages 341-369, September.
    • Handle: RePEc:eee:pacfin:v:16:y:2008:i:4:p:341-369
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    3. Graham, Michael & Walter, Terry S. & Yawson, Alfred & Zhang, Huizhong, 2017. "The value-added role of industry specialist advisors in M&As," Journal of Banking & Finance, Elsevier, vol. 81(C), pages 81-104.
    4. Chiu, Shih-Chi (Sana) & Pathak, Seemantini & Sabz, Azadeh, 2022. "The impact of advisor status on corporate divestitures and market reactions," Journal of Business Research, Elsevier, vol. 144(C), pages 107-121.
    5. Guo, Jie (Michael) & Li, Yichen & Wang, Changyun & Xing, Xiaofei, 2020. "The role of investment bankers in M&As: New evidence on Acquirers’ financial conditions," Journal of Banking & Finance, Elsevier, vol. 119(C).
    6. Schiereck, Dirk & Sigl-Grüb, Christof & Unverhau, Jan, 2009. "Investment bank reputation and shareholder wealth effects in mergers and acquisitions," Research in International Business and Finance, Elsevier, vol. 23(3), pages 257-273, September.
    7. Kai-Shi Chuang, 2017. "The role of investment banks on the impact of firm performance in mergers and acquisitions: evidence from the Asia-Pacific market," Review of Quantitative Finance and Accounting, Springer, vol. 48(3), pages 677-699, April.
    8. Huang, Qiongyu & Zhang, Ruiyao & Li, Siyao & Li, Jingjing & Yao, Qiong, 2024. "The role of financial advisorʼs industry expertise in M&A quality: Evidence from goodwill impairment," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 216-231.
    9. Daniliuc, Sorin & Guo, Hui & Wee, Marvin, 2023. "The usefulness of financial advisors to government-influenced Chinese acquirers," Global Finance Journal, Elsevier, vol. 55(C).
    10. Adesoji O. Adelaja & Ramyani Mukhopadhyay, 2022. "Time‐to‐completion for mergers and acquisitions in the food and agribusiness industry," Agribusiness, John Wiley & Sons, Ltd., vol. 38(3), pages 579-607, July.
    11. Harald Bathelt & Sebastian Henn, 2021. "Knowledge exchanges, trust, and secretive geographies in merger and acquisition processes," Environment and Planning A, , vol. 53(6), pages 1435-1453, September.
    12. Feng, Yun & Liu, Chelsea & Yawson, Alfred, 2023. "Economic shocks, M&A advisors, and industry takeover activity," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    13. Chuang, Kai-Shi, 2014. "Financial advisors, financial crisis, and shareholder wealth in bank mergers," Global Finance Journal, Elsevier, vol. 25(3), pages 229-245.

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