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The International Diversification of Banks and the Value of their Cross-Border M&A AdviceAbe De JongErasmus University - Rotterdam School of Management Steven OngenaTilburg University - CentER, European Banking Center (EBC); Centre for Economic Policy Research (CEPR) Marieke Van der PoelErasmus University - Rotterdam School of Management March 3, 2013 European Banking Center Discussion Paper No. 2010-03 CentER Discussion Paper Series No. 2010-24 Abstract: We examine the impact of the international diversification by banks on the value of their advice provided in cross-border merger and acquisition transactions by studying bidder returns and deal performance following 1,708 cross-border M&A deals. We find that bidders engaging a more internationally diversified financial advisor face lower stock price and synergy returns, worse deal operating performance, and slower deal completion. We show that these negative effects of diversification can be mitigated by involvement in financing or country-specific capacity slack of the advisor. These findings suggest a trade-off between the benefits of advisors’ international diversification that are potentially related to the flexibility of allocating deals to the most skilled team, and the costs emanating from a lack of target-country-specific commitment and greater conflicts of interest.
Number of Pages in PDF File: 60 Keywords: Bank Diversification, Cross-Border Mergers and Acquisitions, Advisor Choice JEL Classification: G24, G34 working papers seriesDate posted: March 22, 2010 ; Last revised: March 4, 2013Suggested CitationContact Information
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