The Valuation Impact of Financial Advisors: An Empirical Analysis of Reit Merger and Acquisitions

Abstract

This paper analyzes the effect of financial advisor-monitors on the valuation of REIT mergers. We analyze advisor choice determinants and the effects of advisors on transaction value using a sample of REIT mergers for the 1981 to 2001 period. We estimate a two stage target firm pricing model: the first stage (logit) estimates the probability of the advisor use and the second stage analyzes the effect of advisors on target firm valuation. The results indicate that financial advisor monitoring, possibly by reducing information asymmetries, has significant positive effects on the value of REIT acquisitions.

Keywords: REIT, mergers and acquisitions, transaction value

JEL Classification: G34, L85