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Do financial advisors matter for M&A pre-announcement returns?

André Betzer, Jasmin Gider and Peter Limbach

No 22-03, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: This study documents economically meaningful and persistent financial advisor fixed effects in target firms' abnormal stock returns shortly prior to takeover announcements.Additional difference-in-differences analyses suggest that advisors are associated with lower pre-bid stock returns after their senior staff were defendants in SEC insider trading enforcement actions. Returns are higher for advisors with more previously advised deals and those located in NYC. The evidence helps explain the prevalent phenomenon of pre-bid stock returns. It contributes to the inconclusive literature on banks' exploitation of private information gained via advisory services, which is limited to disclosed, traceable activities indicative of information leakage.

Keywords: Financial Advisors; Mergers and Acquisitions; Information Leakage; Target Runups (search for similar items in EconPapers)
JEL-codes: G14 G15 G21 G34 K42 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-cwa, nep-fmk, nep-law and nep-mst
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