Law Firm Expertise and Shareholder Wealth

45 Pages Posted: 17 Dec 2019

See all articles by Denis Schweizer

Denis Schweizer

Concordia University

Ge Wu

University of Richmond

Date Written: December 1, 2019


This paper examines the impact of law firm expertise on bidder and target shareholder wealth gains during mergers and acquisitions. After controlling for endogeneity in the matching between the mandating firm (bidder or target firm) and the law firm, we find that top-tier law firms increase the wealth of bidder shareholders by an average of 0.98% ($15.09 million), but not that of target firm shareholders. Interestingly, we also find no evidence that the reputation of the investment bank that neither advises the bidder nor the target firm is related to shareholder wealth gains. Our findings are consistent with Krishnan and Masulis (2013), and suggest that top-tier lawyers are effective “transaction cost engineers.” They create value for their clients by structuring deals to minimize transaction and regulatory costs, and by achieving a higher completion probability.

Keywords: Acquisition, Legal Advisory, Law Firm, M&A, Merger Clause, Takeover Premium

JEL Classification: G14, G24, G34

Suggested Citation

Schweizer, Denis and Wu, Ge, Law Firm Expertise and Shareholder Wealth (December 1, 2019). Available at SSRN: or

Denis Schweizer (Contact Author)

Concordia University ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1M8
+1 (514) 848-2424 ext. 2926 (Phone)
+1 (514) 848-4500 (Fax)


Ge Wu

University of Richmond ( email )

102 UR Drive
Richmond, VA 23173
United States

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