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Investment Bank Market Share, Contingent Fee Payments, and the Performance of Acquiring Firms

Posted: 8 Mar 2001  

P. Raghavendra Rau

University of Cambridge

Abstract

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

Rau, P. Raghavendra, Investment Bank Market Share, Contingent Fee Payments, and the Performance of Acquiring Firms. Journal of Financial Economics, Vol. 56, No. 2, pp. 293-324, 2005. Available at SSRN: https://ssrn.com/abstract=251505

P. Raghavendra Rau (Contact Author)

University of Cambridge ( email )

Cambridge Judge Business School
Trumpington Street
Cambridge, Cambridgeshire CB21AG
United Kingdom
3103626793 (Phone)

HOME PAGE: http://www.raghurau.com/

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