Strategic Communication Among Banks

Christian Bittner (), Falko Fecht, Melissa Pala () and Farzad Saidi ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Do economic incentives govern information diffusion in markets? Using international banks’ advisory activities in corporate takeovers as their source of private information, we show in supervisory data that banks with closer ties to the target, but not the acquirer, advisor trade profitably in the target’s stock prior to the deal announcement. This trading behavior is associated with a higher premium paid by the acquirer without compromising the deal success. As the incentives of informed traders are aligned only with those of the target shareholders, which are represented by the target advisor, our evidence suggests strategic information transmission among these banks.

Keywords: bank networks; trading; information transmission; mergers and acquisitions; syndicated lending (search for similar items in EconPapers)
JEL-codes: D22 G14 G20 G21 L14 (search for similar items in EconPapers)
Pages: 60
Date: 2024-08
New Economics Papers: this item is included in nep-inv
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