نقش بانک های سرمایه گذاری در تاثیر عملکرد شرکت در ادغام و اکتساب: شواهد از بازار آسیا پیسیفیک The role of investment banks on the impact of firm performance in mergers and acquisitions: evidence from the Asia-Pacific market

1 Introduction Mergers and acquisitions (M&As) can be one of the major corporate strategies for firms. Successful corporate strategies can reallocate substantial resources within an economy (Golubov et al. 2012). Bao and Edmans (2011) also argue that misguided acquisitions can damage the potential of firms due to misallocation of companies to bidding firms. To reduce the probability of engaging in bad acquisitions, firms may hire investment banks as financial advisors in M&As. Financial advisors offer their expertise to evaluate synergies and accelerate the transaction process (Servaes and Zenner 1996; Schiereck et al. 2009; Wang and Whyte 2010). Chemmanur and Fulghieri (1994) and Golubov et al. (2012) argue that top-tier investment banks with a good reputation can serve as experts in M&As. These investment banks provide superior services to their clients in return for considerable advisory fees. In addition, the use of financial advisors can assist targets to negotiate favorable terms to their shareholders.1 A number of existing literatures have examined the role of financial advisors on deal outcomes in M&As (e.g., McLaughlin 1992; Servaes and Zenner 1996; Hunter and Jagtiani 2003; Golubov et al. 2012; Song et al. 2013). These studies report conflicting results. For example, studies, such as McLaughlin (1992), Servaes and Zenner (1996), Rau (2000) and Hunter and Jagtiani (2003), report that bidders obtain lower announcement returns when hiring first-tier investment banks. Similarly, Lowinski et al. (2004) also report that bidders advised by a leading investment bank do not obtain higher announcement returns. Instead, Golubov et al. (2012) find that bidders advised by top-tier advisors obtain higher announcement returns when acquiring public targets. As there are a large number of relatively small firms with high growth potential in the Asia Pacific market, mergers and acquisitions can be a way to allow these firms to enlarge their business operation and achieve their corporate objectives. Thus, these firms lead to a more competitive takeover market. In addition, Rossi and Volpin (2004) and Skouratova and Wald (2013) argue that takeover markets are more active in countries with stronger corporate governance regimes. However, studies, such as Claessens and Fan (2002), Acemoglu and Johnson (2005) and Shu et al. (2013), argue that legal protections for minority shareholders are limited for most emerging countries. While the legal requirement in terms of investor protection in each nation in the Asia Pacific market can vary, this increases the complexity of transactions in cross border deals. The more complex the deals, the greater the need for financial advisors. Thus, the presence of high reputation financial advisors can have more ability to provide superior advisory skills to their clients due to their past experience in M&As. While prior studies report mixed findings, the empirical results cannot fully support the view that top-tier financial advisors can create higher value to their clients. In addition, none of prior studies focuses on the Asia Pacific market to explore the role of financial advisors on deal outcomes in M&As. Due to the lack of empirical evidence in the Asia Pacific market, it remains a puzzle as to whether financial advisors with high reputation can help their clients outperform those with lower reputation. Hence, the Asia Pacific market provides an excellent opportunity to examine the performance of financial advisors on deal outcomes for bidding firms in M&As. As a result, this study revisits this issue to explore whether the level of financial advisors can influence deal outcomes for bidding firms in M&As.