Do Firms Use M&A Business to Pay for Analyst Coverage?

27 Pages Posted: 11 Oct 2013

See all articles by Valeriy Sibilkov

Valeriy Sibilkov

University of Wisconsin - Milwaukee - Department of Finance

Miroslava Straska

Virginia Commonwealth University (VCU) - School of Business

H. Gregory Waller

Virginia Commonwealth University School of Business

Date Written: November 2013

Abstract

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.

Keywords: mergers and acquisitions, analyst coverage, financial advisors

JEL Classification: G24, G34

Suggested Citation

Sibilkov, Valeriy and Straska, Miroslava and Waller, H. Gregory, Do Firms Use M&A Business to Pay for Analyst Coverage? (November 2013). Financial Review, Vol. 48, Issue 4, pp. 725-751, 2013, Available at SSRN: https://ssrn.com/abstract=2338856 or http://dx.doi.org/10.1111/fire.12022

Valeriy Sibilkov

University of Wisconsin - Milwaukee - Department of Finance ( email )

Milwaukee, WI 53201-0742
United States

Miroslava Straska

Virginia Commonwealth University (VCU) - School of Business ( email )

Richmond, VA 23284-4000
United States

H. Gregory Waller

Virginia Commonwealth University School of Business ( email )

Richmond, VA 23226
United States

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