Do Firms Use M&A Business to Pay for Analyst Coverage?. Issue 4 (8th October 2013)

• Record Type: Journal Article
• Authors: Sibilkov, Valeriy; Straska, Miroslava; Waller, H. Gregory
• Is Part Of: Financial review. Volume 48:Issue 4(2013)
• Page Start: 725
• Page End: 751
• Publication Date: 2013-10-08
• Subjects: Finance -- United States -- Periodicals; Finance -- Periodicals; 332
• DOI: 10.1111/fire.12022
• Languages: English
• ISSNs: 0732-8516

Abstract

<abstract abstract-type="main"> <title>Abstract</title> <p>We find that acquirers in merger and acquisition (M&amp;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&amp;A advisor appointments and advisor fees to compensate for it.</p> </abstract>