Does relationship matter? The choice of financial advisors

Bill B. Francis, Iftekhar Hasan and Xian Sun

Journal of Economics and Business, 2014, vol. 73, issue C, 22-47

Abstract: This study evaluates whether and how relationships influence acquirers’ choice of financial advisors in mergers and acquisitions (M&As). Specifically, it examines how acquirers’ relationships with their advisors, including their optimism of analyst recommendations and the outcome of their past services, determine the choice of advisors in current transaction. Findings suggest that banking relationships have significant yet limited influence on a firm's choice of M&A advisor. The evidence reveals that firms without recent M&A experience are more likely to choose their underwriters as financial advisors in stock-paid deals, especially when they provide overly optimistic analyst coverage prior to the transactions. Firms with recent M&A experience, however, are more likely to switch financial advisors with poor outcomes in past deal(s).

Keywords: Mergers and acquisitions; Financial advisors; Relationship banking; Analyst coverage; Conflict of interests; Proactive (search for similar items in EconPapers)
JEL-codes: G1 G14 G24 G28 G31 G34 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Working Paper: Does relationship matter? The choice of financial advisors (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:73:y:2014:i:c:p:22-47

DOI: 10.1016/j.jeconbus.2013.12.002

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