Abstract

http://ssrn.com/abstract=952935
 
 

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Do Investment Banks Matter for M&A Returns?


Jack Bao


Ohio State University (OSU) - Department of Finance

Alex Edmans


London Business School - Institute of Finance and Accounting; University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

December 20, 2010

Review of Financial Studies, Vol. 24, No. 7, pp. 2286-2315, July 2011
EFA 2007 Ljubljana Meetings Paper

Abstract:     
We document a significant investment bank fixed effect in the announcement returns of an M&A deal. The inter-quartile range of bank fixed effects is 1.26%, compared to a full-sample average return of 0.72%. The results remain significant after controlling for the component of returns attributable to the acquirer. Our findings suggest that investment banks matter for M&A outcomes, and contrast earlier studies which show no positive link between various measures of advisor quality and M&A returns. Differences in average returns across banks are also persistent over time and predictable from prior performance. Clients do not chase past returns, which may explain why persistence exists in M&A performance while it is absent in mutual funds.

Number of Pages in PDF File: 41

Keywords: Investment Banking, Persistence, Mergers & Acquisitions

JEL Classification: G24, G34

Accepted Paper Series


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Date posted: December 21, 2006 ; Last revised: December 7, 2011

Suggested Citation

Bao, Jack and Edmans, Alex, Do Investment Banks Matter for M&A Returns? (December 20, 2010). Review of Financial Studies, Vol. 24, No. 7, pp. 2286-2315, July 2011; EFA 2007 Ljubljana Meetings Paper. Available at SSRN: http://ssrn.com/abstract=952935

Contact Information

Jack Bao
Ohio State University (OSU) - Department of Finance ( email )
2100 Neil Avenue
814 Fisher Hall
Columbus, OH 43210-1144
United States
Alex Edmans (Contact Author)
London Business School - Institute of Finance and Accounting ( email )
Sussex Place
Regent's Park
London NW1 4SA
United Kingdom
University of Pennsylvania - The Wharton School ( email )
3733 Spruce Street
Philadelphia, PA 19104-6374
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
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