The role of bank advisors in mergers and acquisitions

Linda Allen, Julapa Jagtiani, Stavros Peristiani () and Anthony Saunders

No 143, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper looks at the role of both commercial and investment banks in providing merger advisory services. In this area, unlike some areas of investment banking, commercial banks have always been allowed to compete directly with investment banks. In their dual role as lenders and advisors to firms that are the target or the acquirer in a merger, banks can be viewed as serving a certification function. However, banks acting as both lenders and advisors face a potential conflict of interest that may mitigate or offset any certification effect. Overall, we find evidence supporting the certification effect for target firms. In contrast, conflicts of interest appear to dominate the certification effect when banks are advisors to acquirers.

Keywords: Bank mergers; Banks and banking (search for similar items in EconPapers)
Date: 2002
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