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Journal of Financial and Quantitative Analysis Vol. 57 No. 2 2022

Expert Advice: Industry Expertise of M&A Advisors and Acquirer Shareholder Returns

Cong Wang1; Fei Xie2; Kuo Zhang3

1 Chinese University of Hong Kong, Shenzhen · 2 University of Delaware Alfred Lerner College of Business and Economics and European Corporate Governance Institute (ECGI · 3 Shanghai Jiao Tong University

Abstract

We find that acquirers create higher shareholder returns when advised by investment banks with more experience in the target industry. This finding is stronger when acquirers face more difficulties understanding and evaluating the targets. Further analyses show that these banks help acquirers avoid overpaying for targets and thus capture more of the deal synergy rather than making deals generating higher synergy. Our results are robust to controlling for an exhaustive set of determinants of acquirer returns and an identification strategy that exploits exogenous shocks to the supply of investment banks with target-industry experience.

DOI
10.1017/s0022109021000582
Volume
57
Issue
2
Pages
599-628
Language
en
Sources
crossref bibtex:phds-export.bib openalex

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