Do financial advisors live up to their reputation: the case of major assets restructurings of Chinese listed companies
We investigate whether top-tier advisors provide superior services by examining the relationship between reputation (measured by whether it is a top-10 advisor ranked on deal value) of financial advisors on the bidder side and stock market-based/accounting-based performance of bidders. Using Chinese...
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| Main Authors: | , , |
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| Format: | Conference or Workshop Item |
| Language: | English |
| Published: |
2017
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| Subjects: | |
| Online Access: | http://repo.uum.edu.my/20999/1/shsconf_four2017%201%206v.pdf http://repo.uum.edu.my/20999/ http://doi.org/10.1051/shsconf/20173403001 |
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| Summary: | We investigate whether top-tier advisors provide superior services by examining the relationship between reputation (measured by whether it is a top-10 advisor ranked on deal value) of financial advisors on the bidder side and stock market-based/accounting-based performance of bidders. Using Chinese listed companies with major assets reorganizations (MARs, M&As with large-scale target), we find top-tier advisors are associated with higher excess returns (CARs), implying that reputation generates a verification effect on investors.But we find no significant relationship between the advisor reputation and bidders’ accounting-based performance post-MARs. The findings indicate that although advisor reputation can attract M&A business and sends positive signal to the market, it does not lead to stronger financial performance in the long run. That is, the so-called top-tier financial advisors fail to live up to their reputation.We also find that payment premium is an intervening variable between advisor reputation and the long-term accounting-based performance of bidders, suggesting that top-tier advisors fail in their duties to help clients achieve greater share of synergy gains. |
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