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Prior Client Performance and the Choice of Investment Bank Advisors in Corporate Acquisitions

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  • Valeriy Sibilkov
  • John J. McConnell

Abstract

Contrary to earlier studies, we find that prior client performance is a significant determinant of the likelihood that an investment bank will be chosen as the advisor by future acquirers and of the changes through time in banks' shares of the advisory business. Further, the changes in the market values of acquirers at the announcement of acquisition attempts are positively correlated with contemporaneous changes in the market values of their advisors. Two implications arise: (1) acquirers consider advisors' prior client performance when choosing their advisors and (2) market forces work to align advisors' and clients' interests in the acquisition market.

Suggested Citation

  • Valeriy Sibilkov & John J. McConnell, 2014. "Prior Client Performance and the Choice of Investment Bank Advisors in Corporate Acquisitions," The Review of Financial Studies, Society for Financial Studies, vol. 27(8), pages 2474-2503.
    • Handle: RePEc:oup:rfinst:v:27:y:2014:i:8:p:2474-2503.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhu031
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    Citations

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    Cited by:

    1. Bi, XiaoGang & Wang, Danni, 2018. "Top-tier financial advisors, expropriation and Chinese mergers & acquisitions," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 157-166.
    2. 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.
    3. Michael, Bryane & Wojick, Dariusz & Arner, Douglas W. & Tong, Wilson & Lin, Chen & Zhao, Simon, 2015. "What Determines M&A Legal and Financial Advisors’ Competitiveness in an International Financial Centre: Using China’s Going Out Policy as a Natural Experiment," EconStor Preprints 110603, ZBW - Leibniz Information Centre for Economics.
    4. Bhattacharya, Debarati & Hsu, Shih-Che & Li, Wei-Hsien & Liu, Chun-Ting, 2019. "A combined firm's decision to hire the target's financial advisor after acquisition: Does “service excellence” pay off?," Finance Research Letters, Elsevier, vol. 29(C), pages 297-302.
    5. Liu, Qi & Sun, Xian & Wu, Hong, 2019. "Premier advisory services for VIP acquirers," Journal of Corporate Finance, Elsevier, vol. 54(C), pages 1-25.
    6. Humphery-Jenner, Mark & Karpavicius, Sigitas & Suchard, Jo-Ann, 2018. "Underwriter relationships and shelf offerings," Journal of Corporate Finance, Elsevier, vol. 49(C), pages 283-307.
    7. Johannes Kolb, 2019. "Do investment banks create value for their clients? Empirical evidence from European acquisitions," European Financial Management, European Financial Management Association, vol. 25(1), pages 80-115, January.

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