DP7735 The international diversification of banks and the value of their cross-border M&A advice

Author(s): Abe De Jong, Steven Ongena, Marieke van der Poel
Publication Date: March 2010
Keyword(s): Advisor Choice, Bank Diversification, Cross-Border Mergers and Acquisitions
JEL(s): G24, G34
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7735

This paper investigates the effects of international diversification of banks on the value of their M&A advice. We study bidder returns to 1,253 cross-border M&A announcements. We find that acquirers engaging a more internationally diversified financial advisor generate lower excess returns. Acquirers benefit most from advisors with a greater focus on their home country. These results suggest that the benefits of advisors? international diversification related to greater economies of scale and scope and the flexibility of allocating deals to the most skilled employee do not outweigh the costs emanating from a lack of country-specific knowledge and greater conflicts of interest.