Prior Client Performance and the Choice of Investment Bank Advisors in Corporate Acquisitions

53 Pages Posted: 11 Jul 2012 Last revised: 24 Jan 2014

See all articles by Valeriy Sibilkov

Valeriy Sibilkov

University of Wisconsin - Milwaukee - Department of Finance

John J. McConnell

Purdue University

Date Written: November 13, 2013

Abstract

Contrary to earlier studies, we find that prior client performance is a significant determinant of the likelihood that an investment bank will be chosen as the advisor by future acquirers and that prior client performance is a significant determinant of the changes through time in banks’ shares of the advisory business. Further, we find that the changes in the market values of acquirers at the announcement of acquisition attempts are positively correlated with contemporaneous changes in the market values of their advisors. Two implications arise: (1) managers of acquiring firms consider advisors’ prior clients’ performance when choosing their advisors and (2) market forces work to align advisors’ and clients’ interests in the acquisition market.

Keywords: corporate control transactions, mergers, acquisitions, investment bank advisors

JEL Classification: G32, G34

Suggested Citation

Sibilkov, Valeriy and McConnell, John J., Prior Client Performance and the Choice of Investment Bank Advisors in Corporate Acquisitions (November 13, 2013). Available at SSRN: https://ssrn.com/abstract=2103373 or http://dx.doi.org/10.2139/ssrn.2103373

Valeriy Sibilkov (Contact Author)

University of Wisconsin - Milwaukee - Department of Finance ( email )

Milwaukee, WI 53201-0742
United States

John J. McConnell

Purdue University ( email )

MGMT, KRAN
403 West State St.
West Lafayette, IN 47907-2056
United States
765-494-5910 (Phone)
765-494-7863 (Fax)

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