Does investment bank reputation affect bidder returns in mergers and acquisitions? Empirical evidence from the European markets

Abstract

This thesis analyses whether using a top-tier financial advisor in a merger or an acquisition produces higher returns for the bidder in the deal, indicating that the reputation of the financial advisor matters in deal-making. To evaluate the reputational effect, I apply cross-sectional OLS regression analysis for European mergers and acquisitions that are announced between 1.1.2006 and 31.12.2019. I find evidence that using a top-tier advisor produces higher announcement returns. In addition, I observe that the reputational effect is larger when the bidder is small, suggesting that the reputation of the financial advisor creates more credibility for the bidder.