| In essay 1, using a sample of acquisitions of private targets from January 1992 to December 2010, I find that special information asymmetry when bidders pursue private targets alters the factors used by bidders and targets to decide whether to hire an investment bank. Regarding the effectiveness of the investment bank, I report several notable findings. First, there is no impact on the wealth effect of a bidder when it hires an investment bank. On the target side, the investment bank helps their client exploit increased benefits from the bidder. Second, the existence of an investment bank on the bidder side has a positively significant impact on the proportion of the equity payment. Investment banks with a better reputation are associated with an increased use of equity as payment. Third, the risks of a bidder that hires an investment bank decrease significantly following the acquisition. Therefore, it appears that the investment bank has a significant impact on the outcome of the acquisition of a private target. Essay 2: Investment bank role in asset sell-off transactions.;In essay 2, I also find that special information asymmetry when a buyer pursues divested assets alters the factors used by the buyer and seller to decide whether to hire an investment bank. However, the country characteristics variables do not have any impact on the decision of either the buyer or the seller. I find that the existence of an investment bank does not have any impact on the method of payment of the asset sell-offs or the post-transaction operating performance of the buyer. However, the investment bank has a significant impact on the cumulative abnormal returns (CARs) as well as the risk-shifts of the buyer. I find evidence that the buyer realizes a significantly higher CAR when it employs an investment bank. On the other hand, the buyer has a significantly lower CAR when the seller uses an investment bank. Nevertheless, the benefits disappear when the buyer (seller) employs a top-tier investment bank. Moreover, I find that when the seller employs an investment bank, the increase in unsystematic and total risk of the buyer is greater than in cases when the seller does not use an investment bank. |
