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Efficiency in the Market for Financial Advisory Services to Businesses

Author

Listed:
  • Shaun Hargreaves-Heap

    (King’s College, London)

  • Oleksandr Talavera

    (University of Birmingham)

Abstract

This paper considers whether company decisions on their advisors promote efficiency in the market for business advisory services. We employ a fixed effects measure of advisor quality and find that no fine-grained measure of performance seems to influence separation and hiring decisions. We do find that, under a rule of thumb measure of advisor performance, firms are more likely to ditch “bad” and “neutral” advisors than “good” ones. Unfortunately, using the same rule of thumb measure, firms appear no more likely to hire “good” quality new advisors than could be expected by chance. As a result, in less than 10% of all separations the new hire yields an improvement in advisor quality. In short, there is a substantial amount of movement in the market with no benefit.

Suggested Citation

  • Shaun Hargreaves-Heap & Oleksandr Talavera, 2018. "Efficiency in the Market for Financial Advisory Services to Businesses," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 246, pages 34-49.
    • Handle: RePEc:ukb:journl:y:2018:i:246:p:34-49
    DOI: 10.26531/vnbu2018.245.034
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    File URL: https://journal.bank.gov.ua/en/article/2018/246/03
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    References listed on IDEAS

    as
    1. Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
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    More about this item

    Keywords

    financial advice; performance;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other

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