We appreciate helpful comments from David Denis, David Ikenberry, Lilian Ng, Geoffrey Smith, and finance seminar participants at University of Wisconsin – Milwaukee. This paper previously circulated under the title “Are Financial Advisor Appointments in Mergers and Acquisitions Used to Pay for Analyst Coverage?”
Do Firms Use M&A Business to Pay for Analyst Coverage?
Article first published online: 8 OCT 2013
© 2013 The Eastern Finance Association
Volume 48, Issue 4, pages 725–751, November 2013
How to Cite
Sibilkov, V., Straska, M. and Waller, H. G. (2013), Do Firms Use M&A Business to Pay for Analyst Coverage?. Financial Review, 48: 725–751. doi: 10.1111/fire.12022
- Issue published online: 8 OCT 2013
- Article first published online: 8 OCT 2013
- mergers and acquisitions;
- analyst coverage;
- financial advisors;
We find that acquirers in merger and acquisition (M&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&A advisor appointments and advisor fees to compensate for it.