Research Discussion Papers, Bank of Finland
No 31/2012:
Home preference at selecting financial advisors in cross-border M&As
Bill B. Francis ()
, Iftekhar Hasan ()
and Xian Sun ()
Abstract: This paper examines the determinants of the choice of
financial advisors and their impact on the announcement effects of US
acquirers in cross-border M&As. Two hypotheses are tested: one pertains to
the acquiring firms’ home preference in selecting financial advisors, and
the other relates to advisors’ experience in target countries. Evidence
supports the home preference hypothesis in the selection of advisors in
cross-border M&As, particularly in all-cash paid transactions where
acquirers take the entire risk of not realizing the expected synergy value.
We also observe home preference among investors as acquirers that picked US
advisors experience significantly higher positive abnormal returns in
all-cash paid transactions than those without US advisors, even when the
chosen US advisors do not have significant experience in the target
country. Finally, home preference at the choice of financial advisor may be
costly if US acquirers pass by more experienced because of home
preference.
Keywords: financial advisors; certification; payment method; cross border mergers and acquisitions; (follow links to similar papers)
JEL-Codes: G14; G15; G24; G32; G34; (follow links to similar papers)
48 pages, October 29, 2012
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