Abstract

http://ssrn.com/abstract=1787086
 


 



The Role of Investment Banker Directors in M&A: Can Experts Help?


Qianqian Huang


City University of Hong Kong

Feng Jiang


State University of New York (SUNY) at Buffalo - School of Management

Erik Lie


University of Iowa - Henry B. Tippie College of Business

Ke Yang


Lehigh University

July 1, 2011

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
We examine how directors with investment banking experience affect a firm’s acquisition behavior. We find that the presence of investment banker directors is associated with a higher probability of subsequent acquisitions, and such positive relation is not driven by reverse causality. Focusing on firms that make acquisitions, we find that acquirers with investment banker directors on the board have significantly higher announcement returns. The positive effect is more pronounced when the deal is more important and when the bankers’ experience and/or network is current. For the sample of large deals, we find that the presence of investment banker directors is associated with lower target announcement returns and takeover premium, consistent with the view that investment banker directors assist in determining and/or negotiating the price for their shareholders in important deals. In addition, we find financial advisory fees paid to outside advisors are significantly lower when there are investment bankers on the board. The presence of investment banker directors is also positively related to the long-run operating and stock performance. Overall, our results suggest that directors with investment banking experience can affect a firm’s acquisition policy and that they help firms make better acquisitions.

Number of Pages in PDF File: 47

Keywords: investment banker mergers and acquisitions

JEL Classification: G34, G30

Accepted Paper Series


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Date posted: March 23, 2011 ; Last revised: August 13, 2013

Suggested Citation

Huang, Qianqian and Jiang, Feng and Lie, Erik and Yang, Ke, The Role of Investment Banker Directors in M&A: Can Experts Help? (July 1, 2011). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1787086 or http://dx.doi.org/10.2139/ssrn.1787086

Contact Information

Qianqian Huang
City University of Hong Kong ( email )
83 Tat Chee Avenue
Kowloon
Hong Kong
852-3442-0284 (Fax)
Feng Jiang
State University of New York (SUNY) at Buffalo - School of Management ( email )
344 Jacobs Management Center
Buffalo, NY 14260
United States
716-645-3225 (Phone)
Erik Lie (Contact Author)
University of Iowa - Henry B. Tippie College of Business ( email )
108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
Ke Yang
Lehigh University ( email )
621 Taylor Street
Bethlehem, PA 18015
United States
6107583684 (Phone)
6107586429 (Fax)
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