Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts

33 Pages Posted: 27 Apr 2005

See all articles by Charles W. Calomiris

Charles W. Calomiris

Columbia University - Columbia Business School; National Bureau of Economic Research (NBER)

Donna M. Hitscherich

Columbia University - Columbia Business School, Finance

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Date Written: April 20, 2005

Abstract

Our results are broadly consistent with the predictions of a benign view of the role of investment banks in advising acquisition targets. Fees to investment banks are correlated with attributes of transactions and target firms in ways that make sense if banks are being paid for processing information. The more contingent (and, therefore, risky) the fees, the higher they tend to be, all else held constant. Variation in acquisition premia also can be explained by fundamental deal attributes. Contrary to the jaundiced view of fairness opinions, greater fixity of fees is not associated with higher acquisition premia, and there is no evidence that investment banks are suborned by acquirors with whom they have had a prior banking relationship.

Keywords: Fairness opinions, conflicts of interest, investment bank, fees, merger, acquisition premia

JEL Classification: G2, G24, G28, G3, G34, G38, G00

Suggested Citation

Calomiris, Charles W. and Hitscherich, Donna M., Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts (April 20, 2005). 1st Annual Conference on Empirical Legal Studies Paper, Available at SSRN: https://ssrn.com/abstract=708222 or http://dx.doi.org/10.2139/ssrn.708222

Charles W. Calomiris (Contact Author)

Columbia University - Columbia Business School ( email )

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National Bureau of Economic Research (NBER)

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Donna M. Hitscherich

Columbia University - Columbia Business School, Finance ( email )

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New York, NY 10027
United States

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