Date of this Version
Review of Financial Studies
We document a significant investment bank fixed effect in the announcement returns of M&A deals. The interquartile range of bank fixed effects is 1.26%, compared with a full-sample average return of 0.72%. The results remain significant after controlling for the component of returns attributable to the acquirer. Our findings suggest that investment banks matter for M&A outcomes, and contrast earlier studies that show no positive link between various measures of advisor quality and M&A returns. Differences in average returns across banks are also persistent over time and predictable from prior performance. Clients do not chase past returns, which may explain why persistence exists in M&A performance while it is absent in mutual funds.
This is a pre-copyedited, author-produced PDF of an article accepted for publication in Review of Financial Studies following peer review. The version of record is available online at: http://dx.doi.org/10.1093/rfs/hhr014.
Bao, J., & Edmans, A. (2011). Do Investment Banks Matter for M&A Returns?. Review of Financial Studies, 24 (7), 2286-2315. http://dx.doi.org/10.1093/rfs/hhr014
Date Posted: 27 November 2017
This document has been peer reviewed.