Working Paper: CEPR ID: DP7735
Authors: Abe de Jong; Steven Ongena; Marieke van der Poel
Abstract: This paper investigates the effects of international diversification of banks on the value of their M&A advice. We study bidder returns to 1,253 cross-border M&A announcements. We find that acquirers engaging a more internationally diversified financial advisor generate lower excess returns. Acquirers benefit most from advisors with a greater focus on their home country. These results suggest that the benefits of advisors? international diversification related to greater economies of scale and scope and the flexibility of allocating deals to the most skilled employee do not outweigh the costs emanating from a lack of country-specific knowledge and greater conflicts of interest.
Keywords: advisor choice; bank diversification; cross-border mergers and acquisitions
JEL Codes: G24; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economies of scale and scope (F12) | acquirers' abnormal returns (G34) |
| lack of country-specific knowledge (O57) | acquirers' abnormal returns (G34) |
| greater conflicts of interest (G34) | acquirers' abnormal returns (G34) |
| advisor diversification (G24) | acquirers' abnormal returns (G34) |
| focus on home country by advisors (F23) | acquirers' abnormal returns (G34) |
| international diversification of banks (F65) | acquirers' abnormal returns (G34) |