Research Snapshots

Investment bankers lower costs of mergers and acquisitions

With mergers and acquisition activity reaching volumes not seen since the pre-crash heyday of 2007, successful strategies are coming under ever closer scrutiny. Dr Qianqian Huang's recent investigation into "The Role of Investment Banker Directors in Mergers and Acquisitions" in the Journal of Financial Economics is therefore timely. Working alongside Feng Jiang, of the State University of New York, Erik Lie of University of Iowa, and Ke Yang, of Lehigh University, Qianqian examines how directors with investment banking experience affect firms' acquisition behavior. They find that firms with investment bankers on the board have a higher probability of making acquisitions. Furthermore, acquirers with investment banker directors experience higher announcement returns, pay lower takeover premiums and advisory fees, and exhibit superior long-run performance. Overall, results suggest that it is worthwhile having directors with investment banking experience on board. They help firms make better acquisitions, both by identifying suitable targets and reducing the cost of the deals.

Read more:
Huang, Qianqian, Feng Jiang, Erik Lie, and Ke Yang. "The Role of Investment Banker Directors in M&A." Journal of Financial Economics 112.2 (2014): 269-286. Print.