Investment Bank Market Share, Contingent Fee Payments, and the Performance of Acquiring Firms
Posted: 8 Mar 2001
This paper investigates the determinants of the market share of investment banks acting as advisors in mergers and tender offers. In both mergers and tender offers, bank market share is positively related to the contingent fee payments charged by the bank and to the percentage of deals completed in the past by the bank. It is unrelated to the performance of the acquirors advised by the bank in the past. In tender offers, the post-acquisition performance of the acquiror is negatively related to the contingent fee payments charged by the bank, suggesting that the contingent fee structure in tender offers ensures that investment banks focus on completing the deal.
Keywords: Mergers, tender offers, investment bank market share, incentive fee structure, pay-performance relationship
JEL Classification: G34
Suggested Citation: Suggested Citation