Financial Advisors and Shareholder Wealth Gains in Corporate Takeovers

Posted: 30 Jun 2004

See all articles by Jayant R. Kale

Jayant R. Kale

Northeastern University

Omesh Kini

Georgia State University

Harley E. Ryan

Georgia State University - Department of Finance

Abstract

We examine the effect of financial advisor reputation on wealth gains in corporate takeovers. In view of the adversarial nature of a takeover, we construct a measure of the relative reputation of the advisor. We document that the absolute wealth gain as well as the share of the total takeover wealth gain accruing to the bidder (target) increases (decreases) as the reputation of the bidder's advisor increases relative to that of the target. We also find that the total wealth created in the takeover is positively related to the reputation of bidder and target advisors. While bidder advisor reputation is positively related to the probability of bid success in our sample, we also present some evidence to suggest that bidders with better advisors are more likely to withdraw from potentially value-destroying takeovers.

Keywords: Takeovers, Financial Advisors, Reputation

JEL Classification: G24, G34, L14

Suggested Citation

Kale, Jayant Raghunath and Kini, Omesh and Ryan, Harley E., Financial Advisors and Shareholder Wealth Gains in Corporate Takeovers. Available at SSRN: https://ssrn.com/abstract=470002

Jayant Raghunath Kale

Northeastern University ( email )

Boston, MA 02115
United States

Omesh Kini

Georgia State University ( email )

University Plaza
Atlanta, GA 30303-3083
United States
404-651-2656 (Phone)

Harley E. Ryan (Contact Author)

Georgia State University - Department of Finance ( email )

University Plaza
35 Broad Street, Suite 1221
Atlanta, GA 30303-3083
United States
404-651-2674 (Phone)
404-651-2630 (Fax)

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