The Role of Investment Bankers in M&As: New Evidence on Acquirers' Financial Conditions

Xiaofei Xing, Jie Guo, Yichen Li, Changyun Wang

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)
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This paper investigates whether top-tier M&A investment bankers (financial advisors) create value for acquirers with different financial conditions in both the short and long term via analyzing 3420 US deals during 1990-2012. In this paper, deals are divided into three groups based on acquirer financial constraints - acquisitions by constrained, neutral and unconstrained firms. We find that the effects of top-tier bankers are dependent on acquirer financial conditions. Specifically, top-tier advisors improve performance for constrained acquirers rather than neutral, and unconstrained acquirers. Our results show that top-tier investment bankers improve constrained acquirers' short- (5 days) and long-term (36 months) performance by 1.45% and 24.27% respectively, after controlling for firm, deal and market characteristics. For deals with investment banker involvement, constrained acquirers advised by top-tier advisors have the lowest deal completion rate, and pay the lowest bid premiums; while unconstrained acquirers that retain top-tier investment bankers have the highest deal completion rate, and pay relatively high bid premiums. Our findings imply that constrained acquirers tend to retain top-tier investment bankers to gain superior synergy, while unconstrained acquirers appear to retain top-tier investment bankers to ensure the deal completion.
Original languageEnglish
Article number105298
Number of pages15
JournalJournal of Banking & Finance
Early online date6 Feb 2018
Publication statusE-pub ahead of print - 6 Feb 2018


  • Mergers and acquisitions
  • Investment Banker
  • Financial Constraint
  • Firm Performance


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