Working Paper: CEPR ID: DP18362
Authors: Christian Bittner; Falko Fecht; Melissa Pala; Farzad Saidi
Abstract: This paper provides evidence of deliberate private-information disclosure within banks' international business networks. Using supervisory trade-level data, we show that banks with closer ties to a target advisor in a takeover buy more stocks of the target firm prior to the deal announcement, enabling them to benefit from the positive announcement return. We do not find such effects for bank connections to acquirer advisors or for trades in acquirer stocks. Target advisors benefit from leaking information about takeover bids to connected banks, as it drives up the premium paid without compromising the probability of bid success.
Keywords: bank networks; trading; information spillovers; mergers and acquisitions; syndicated lending
JEL Codes: G11; G15; G21; G24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| banks closely connected to target advisors in M&A transactions (G24) | purchase more shares of the target firm prior to deal announcements (G34) |
| connected banks buy more target stocks at lower prices in the 30 days leading up to the announcement (G34) | benefit from the positive announcement returns (G14) |
| target advisors leak private information to connected banks (F65) | drives up the premium paid (G52) |
| target advisors leak private information to connected banks (F65) | does not affect the probability of bid success (D44) |