Expert Advice: Industry Expertise of M&A Advisors and Acquirer Shareholder Returns

Journal of Financial and Quantitative Analysis forthcoming

43 Pages Posted: 25 Aug 2020 Last revised: 11 Jan 2021

See all articles by Cong Wang

Cong Wang

The Chinese University of Hong Kong, Shenzhen

Fei Xie

University of Delaware - Lerner College of Business and Economics; European Corporate Governance Institute (ECGI)

Kuo Zhang

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Date Written: August 5, 2020

Abstract

We find that acquirers create higher shareholder returns when advised by investment banks with more experience in the target industry. This finding is stronger when acquirers face more difficulties understanding and evaluating the targets. Further analyses show that these banks help acquirers avoid overpaying for targets and thus capture more of deal synergy rather than making deals generating higher synergy. Our results are robust to controlling for an exhaustive set of determinants of acquirer returns and an identification strategy that exploits exogenous shocks to the supply of investment banks with target industry experience.

Keywords: Industry Expertise, M&A Advisor, Acquirer Returns, Advisory Fee, Advisor Choice

JEL Classification: G24, G34

Suggested Citation

Wang, Cong and Xie, Fei and Zhang, Kuo, Expert Advice: Industry Expertise of M&A Advisors and Acquirer Shareholder Returns (August 5, 2020). Journal of Financial and Quantitative Analysis forthcoming, Available at SSRN: https://ssrn.com/abstract=3667869 or http://dx.doi.org/10.2139/ssrn.3667869

Cong Wang

The Chinese University of Hong Kong, Shenzhen ( email )

Fei Xie (Contact Author)

University of Delaware - Lerner College of Business and Economics ( email )

42 Amstel Ave
Newark, DE 19716
United States
(302) 8313811 (Phone)

HOME PAGE: http://sites.google.com/site/feisresearch/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Kuo Zhang

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

1954 Huashan Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200030
China

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