Investment bank market share and the performance of the acquiring companies: Canadian evidence

This study examines the relationship between the investment bank market share and the performance of the acquiring companies in Canada. It investigates the validity of two alternative hypotheses proposed by Rau (2000): the superior deal hypothesis and the deal completion hypothesis. Tobin's Q is used as a performance measure to find out if the top quality investment banks reflect their superiority by delivering greater value to their clients compared to low quality banks. The effect of past performance and past market share on the current market share of a particular investment bank is investigated using linear regression. The results show no significant effect of rank or lagged market share on the performance of the acquirer. The study finds no evidence that the rank of the advisor has any effect on the completion time. However, the results show that top tier investment banks dominate in large deals.