Work

Social Networks and the Informational Role of Financial Advisory Firms Centrality in Mergers and Acquisitions

Year: 2021

Type: article

Abstract: This paper examines the role of the social network hierarchy of financial advisory firms in a mergers and acquisitions (M&As) framework. Financial advisors are information intermediaries who play an information extraction and information dissemination role. The more central the advisory firm is within the network of advisory firms, the greater their access to information flows. Our findings indicate that more central advisors are associated with higher acquirer announcement abnormal returns, higher abnormal combined returns and higher operating long‐run performance for the new entity. Central advisors also mitigate information asymmetries, resulting in lower premium paid by bidders. In return, more central advisory firms demand higher advisory fees, engage in higher M&A activity and are more likely to advise large acquirers and acquisitions of large and public deals. Our results are robust to endogeneity and self‐selection concerns.

Source: British Journal of Management

DOI: 10.1111/1467-8551.12477

Authors: Amna Noor Chaudhry, Alexandros Kontonikas, Evangelos Vagenas‐Nanos

Institutions: Islamia University of Bahawalpur, University of Essex, University of Glasgow

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,000

Funder: University of Glasgow