The role of investment banker

directors in M&A

group 9
Motivation
This paper
debate
Director with IB(investment banking) experience
improve the acquisition making process

new
vs
Other
IB director is associated with worse acquisition
purpose

Ib director experience affect firms’ acquisition behavior.

Investment bank
Managing
Director
Investment bank (MD) UP or OUT
1.Mergers and Acquisitons (M&A)
Executive
2.Leveraged Finance Director (ED)
3.Restructuring
4.IPO Vice President (VP)

Associate

Analyst
 Why ib director is important?

1.Prevent mergers and acquisitions of garbage

(Research shows - the value of the company of the M&A
company will decline)

2. Reduce the cost

Endogeneity
1.Instrumental variable (IV)
2.Remove observation
3.Difference-in-difference : Use Sox exogeneous shock
Sox act

fraudulent
Amending increase
financial
the law firms’ cost
activity
Introduce table
Desciptive statistics
(table 1-5)

Empirical result
(table 6-8)

Source of the value gain

(table 9-11)
Desciptive statistics
Table 1

more
Table 2

REVIEW
Review Baur(2012)
How to avoid the financial crisis?

Short Long
Table3
Table 4
y1 = present of Ib directors and acquisition activities

When uncorrelated – single probit model

correlated – bivariate probit model
Table 4

control
dummy
Table 5
IB Directors and the Acquirer
Announcement Returns
Acquisition Sample
4.2. Acquirer announcement returns
 Ib directors with potential conflicts of
interest?
Conjecture : conjecture that the con-current affiliation represents a conflict of
interest.

Results : we find no evidence that IB directors in this subsample have a different

impact on deal performance.

Author's view: we caution drawing strong inferences due to the limited sample
size.
When are IB directors most valuable?
Long-run buy-and-hold abnormal
returns
Source of the value gain
table10
Acquirer advisory fees

facilitate M&A transactions

Lower advisory fees

When the relative target size is large, the negative relation

IB directors and the advisory fees is more pronounced
Post-acquisition operating performance
Two operating performance measures:
1.Raw operating performance

2. Industry-adjusted operating performance

◦ Barber and Lyon (1996) show that tests of changes in operating performance
are only well specified when the sample firms are matched to control firms of
similar pre-event performance.
table11
Conclusion

Ib director is very good !