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Could Relationship Financial Advisors Improve the M&As Efficiency

【Authors】
LI Qinyang, LIU Xiangqiang & YANG Hualing
【WorkUnit】
LI Qinyang, LIU Xiangqiang (Southwest University)
YANG Hualing (Jiangxi Agricultural University)
【Abstract】

This study examines the influence of investment banking relationship on the economic consequences and some mechanisms through which the value effect could be working. Using a sample of M&A events which retain financial advisor from companies listed in China stock market from 2009 to 2014, we find that the acquirer employing a relationship investment bank in M&As experience higher abnormal value gains of 130 million yuan, however, have no effect on the likelihood of deal completion. Further, in terms of mechanisms, choosing a relationship investment bank can help the company reduce the takeover premium and shorten the deal duration. In addition, it is in the higher information asymmetry companies that the above conclusions hold up. On the contrary, for the lower information asymmetry companies, employing a relationship investment bank is more likely to complete the transaction, but have no significant influence on M&As performance,premium and deal completion. Therefore, as a specific asset of companies and investment banks, relationship can help reduce the information asymmetry between them, and improve efficiency of M&As, which is in favor of the superior deal hypothesis. This study not only develop the interdisciplinary research of relationship and finance, as well as the literature related to the role of financial intermediation in M&As, but also provide the regulators with important policy implications about how to promote the market oriented development and the efficiency of M&As.

JEL:G34, G24, L14

【KeyWords】
Relationship,Financial Advisor, Investment Banks,M&A