Social networks and the informational role of financial advisory firms centrality in mergers and acquisitions

Chaudhry, A. N., Kontonikas, A. and Vagenas-Nanos, E. (2022) Social networks and the informational role of financial advisory firms centrality in mergers and acquisitions. British Journal of Management, 33(2), pp. 958-979. (doi: 10.1111/1467-8551.12477)

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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.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Kontonikas, Professor Alexandros and Vagenas-Nanos, Professor Evangelos
Authors: Chaudhry, A. N., Kontonikas, A., and Vagenas-Nanos, E.
College/School:College of Social Sciences > Adam Smith Business School
College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:British Journal of Management
Publisher:Wiley
ISSN:1045-3172
ISSN (Online):1467-8551
Published Online:18 February 2021
Copyright Holders:Copyright © 2021 The Authors
First Published:First published in British Journal of Management 33(2): 958-979
Publisher Policy:Reproduced under a Creative Commons license

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