When It Pays to Pay Your Investment Banker: New Evidence on the Role of Financial Advisors in M&As





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    • Andrey Golubov is from Cass Business School, City University London, UK. Dimitris Petmezas is from Surrey Business School, University of Surrey, UK. Nickolaos G. Travlos is from ALBA Graduate Business School, Greece. We are grateful to the Editor (Campbell Harvey), the Co-Editor (John Graham), an Associate Editor, an Advisory Editor, and an anonymous referee for their detailed and insightful comments. We also thank Christos Cabolis; Thomas Chemmanur; Ettore Croci; Lily Fang; Ioannis Floros; Vasco Gabriel; Yurij Lukashin; Robyn McLaughlin; George Papaioannou; Raghavendra Rau; Anthony Saunders; Henri Servaes; Frank Skinner; Weihong Song; David Stolin; Nicholas Tessaromatis; Athanasios Thanopoulos; Diana Wei; and seminar participants at the CRETE 2010 9th Conference on Research on Economic Theory & Econometrics, Department of Business Administration at Athens University of Economics and Business, and Cass Business School at City University London for helpful comments and suggestions. Part of this project was conducted while Dimitris Petmezas was at Durham University, UK. Golubov acknowledges financial support received from Surrey Business School, University of Surrey. Travlos acknowledges financial support received from the Kitty Kyriacopoulos Chair in Finance. All remaining errors are our own.


We provide new evidence on the role of financial advisors in M&As. Contrary to prior studies, top-tier advisors deliver higher bidder returns than their non-top-tier counterparts but in public acquisitions only, where the advisor reputational exposure and required skills set are relatively larger. This translates into a $65.83 million shareholder gain for an average bidder. The improvement comes from top-tier advisors' ability to identify more synergistic combinations and to get a larger share of synergies to accrue to bidders. Consistent with the premium price–premium quality equilibrium, top-tier advisors charge premium fees in these transactions.