Are Firm-Advisor Relationships Valuable? A Long-Term Perspective

51 Pages Posted: 25 Jan 2015

See all articles by David Becher

David Becher

Drexel University

Rachel Gordon

Drexel University - Bennett S. LeBow College of Business

Jennifer L. Juergens

Cornerstone Research, Inc.

Date Written: January 24, 2015

Abstract

We examine long-term firm-advisor relations using an extended history of debt, equity, and merger transactions. Hard-to-value firms are more likely to maintain dedicated advisor relations (underwriters or merger advisors). Firms that retain predominantly one advisor over their entire transaction history pay higher underwriting/advisory fees, have inferior deal terms, and have lower analyst coverage relative to those that employ many advisors. When we condition on a firm’s information environment as a catalyst for long-term advisor retention, riskier firms obtain better terms when they utilize a variety of advisors, but informationally-opaque firms do not. Our results suggest that only some firms benefit from long-term advisor retention.

Keywords: Advisory relationship; underwriters; debt and equity issuance; mergers; fees

JEL Classification: G24; G32; G34

Suggested Citation

Becher, David and Gordon, Rachel and Juergens, Jennifer L., Are Firm-Advisor Relationships Valuable? A Long-Term Perspective (January 24, 2015). Available at SSRN: https://ssrn.com/abstract=2554845 or http://dx.doi.org/10.2139/ssrn.2554845

David Becher (Contact Author)

Drexel University ( email )

3220 Market Street
1127 Gerri C LeBow Hall
Philadelphia, PA 19104
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215-895-2274 (Phone)
215-895-2295 (Fax)

Rachel Gordon

Drexel University - Bennett S. LeBow College of Business ( email )

101 N. 33rd St.
Philadelphia, PA 19104
United States

Jennifer L. Juergens

Cornerstone Research, Inc.

2001 K Street NW
North Tower, Suite 800
Washington, DC 20006
United States

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