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Strategic Communication Among Banks

Author

Listed:
  • Christian Bittner
  • Falko Fecht
  • Melissa Pala
  • Farzad Saidi

Abstract

Do economic incentives govern information diffusion in markets? Using international banks’ advisory activities in corporate takeovers as their source of private information, we show in supervisory data that banks with closer ties to the target, but not the acquirer, advisor trade profitably in the target’s stock prior to the deal announcement. This trading behavior is associated with a higher premium paid by the acquirer without compromising the deal success. As the incentives of informed traders are aligned only with those of the target shareholders, which are represented by the target advisor, our evidence suggests strategic information transmission among these banks.

Suggested Citation

  • Christian Bittner & Falko Fecht & Melissa Pala & Farzad Saidi, 2024. "Strategic Communication Among Banks," CRC TR 224 Discussion Paper Series crctr224_2024_587, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2024_587
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp587
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    References listed on IDEAS

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    More about this item

    Keywords

    bank networks; trading; information transmission; mergers and acquisitions; syndicated lending;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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