The role of investor protections on the value of investment banking relationships: International evidence

Ya Gao, Chi Liao, Ying Zhang and Zixu Zhang

Journal of International Financial Markets, Institutions and Money, 2021, vol. 72, issue C

Abstract: This paper examines the role of country-level investor protections on the value of relationships between investment banks (IBs) and their corporate clients. Using an event-study approach and an international sample of consolidation activities in the investment banking industry, we document that clients of target IBs acquired by banks from stronger (weaker) investor protection countries realize lower (higher) returns upon merger announcement. This is consistent with a substitution effect between country-level investor protections and IB-level monitoring of client firms. Overall, our analysis highlights the economic role of country-level investor protections on the relationships between IBs and client firms in an international context.

Keywords: Investment banking; Bank-firm relationship; Mergers and acquisitions; Event study; International finance (search for similar items in EconPapers)
JEL-codes: G14 G24 G34 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:72:y:2021:i:c:s1042443121000329

DOI: 10.1016/j.intfin.2021.101313

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