Does It Pay to Acquire Private Firms? Evidence From the U.S. Banking Industry

We extend the U.S. bank M&As literature by examining bidder announcement abnormal returns in deals involving both public and private targets over a 32-years examination period. Our main findings document the existence of a listing effect in our sample. Banks gain when they acquire private firms and lose when they acquire public firms. Gains in private offers are even higher when bidders employ financial advisors, whereas the opposite is true for public deals. We argue that this adverse advisor effect relates to the different levels of information asymmetry between public and private targets. Our results remain robust when we control for usual determinants of bidder abnormal returns, such as the method of payment, size, or relative size and when we control for sample selection and endogeneity problems.

Keywords: Mergers and Acquisitions, Banks, Listing Effect, Financial Advisor

JEL Classification: G14, G21, G34

Suggested Citation: Suggested Citation

Leledakis, George N. and Mamatzakis, E. C. and Pyrgiotakis, Emmanouil G. and Travlos, Nickolaos G. and Travlos, Nickolaos G., Does It Pay to Acquire Private Firms? Evidence From the U.S. Banking Industry (November 28, 2017). The European Journal of Finance, volume 27, issue 10, 2021[10.1080/1351847X.2020.1799835], Available at SSRN: https://ssrn.com/abstract=3078497 or http://dx.doi.org/10.1080/1351847X.2020.1799835