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Do Firms Use M&A Business to Pay for Analyst Coverage?
Author(s) -
Sibilkov Valeriy,
Straska Miroslava,
Waller H. Gregory
Publication year - 2013
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12022
Subject(s) - database transaction , business , value (mathematics) , investment (military) , control (management) , finance , accounting , economics , management , database , law , computer science , machine learning , politics , political science
We find that acquirers in merger and acquisition (M&A) transactions are more likely to hire as advisors investment banks that provided analyst coverage for the acquirer prior to the transaction. We also find that compared to a matched control group of banks, the advisor banks are less likely to terminate and more likely to initiate analyst coverage of the acquirer after the transaction. Finally, the advisor banks that initiate coverage after the transaction collect higher fees. These findings suggest that firms value analyst coverage and use M&A advisor appointments and advisor fees to compensate for it.