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INVESTMENT BANKS IN DUAL ROLES: ACQUIRER M&A ADVISORS AS UNDERWRITERS
Author(s) -
Ertugrul Mine,
Krishnan Karthik
Publication year - 2014
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/jfir.12033
Subject(s) - underwriting , business , investment banking , endogeneity , divestment , dual (grammatical number) , finance , investment (military) , monetary economics , financial system , economics , art , literature , politics , political science , law , econometrics
Abstract We analyze the dual role of investment banks that provide advice to acquiring firms and act as underwriters on the securities issued to finance the acquisition. We find that the dual role of acquirer advisors is associated with lower acquirer announcement returns, higher target announcement returns, higher acquisition premiums, faster completion speeds, and higher divestiture rates. The dual role of the acquirer advisor does not lead to lower underwriting fees or issue costs. Our results are robust to controlling for the endogeneity of selection of the acquirer advisor as underwriter on the security issue used to finance the acquisition.