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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title The International Diversification of Banks and the Value of Their Cross-Border M&A Advice
Organization Unit
Authors
  • Steven Ongena
  • Abe de Jong
  • Anjana Rajamani
  • Marieke Van der Poel
Item Subtype Original Work
Refereed Yes
Status Published electronically before print/final form (Epub ahead of print)
Language
  • English
Journal Title Management Science
Publisher INFORMS
Geographical Reach international
Volume forthcoming
Page Range -
Date 2017
Abstract Text We examine the impact of the international diversification of banks on the value of their advice in 1,705 cross-border merger and acquisition (M&A) transactions. We find that bidders engaging internationally diversified advisors face lower announcement returns. An increase of one standard deviation in advisor diversification is associated with an announcement return lower by 92 basis points for a bidder acquiring a listed target. The lower bidder returns are attributable to the lower synergies of the deals being completed. Our evidence suggests that internationally diversified advisors offer lower-quality advice to their clients, since their reputational concerns are weakened by having access to multiple geographies from which they can derive feebased income. We present further evidence that financial incentives in the form of the advisor’s involvement in deal financing and market incentives in the form of the potential to gain market share in the bidder country may mitigate some of the negative effects of the international diversification of the advisors.
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Digital Object Identifier 10.1287/mnsc.2015.2396
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