The differences of in-house merger and acquisition and investment bank merger and acquisition

This dissertation fulfills the thorough analyses with the categorized in-house M&A transaction samples and two investment bank M&A transaction samples regarding the roles of investment banks in M&A transactions. I find that the acquirors are more likely to use the in-house method in acquisitions than the target firms. The research results demonstrate that the transaction costs are related to the investment banking choice, while the information asymmetry and the contracting costs are weakly related to the investment banking choice. In addition, acquiring firms are more likely to hire investment banks when the acquiring firm operates in the financial industry, and when the targets operate in multiple industries. When I use the categorized in-house samples to do the logistic regressions, I find that the extent of relatedness between the transaction costs and the investment banking choice varies significantly. I find that acquirors more likely hire investment banks if the cash payment is used, and if the acquiror is the first bidder to the target firm. When I use these categorized in-house samples to test the information asymmetry hypothesis and the contracting costs hypothesis, the results show that the information asymmetry and the contracting costs are weakly related to the decision on hiring investment banks in M&A transactions. In contrast, the target firms are more likely to hire investment banks when cash payment is used, when the acquiror is the first bidder, and when the acquisition is not a whole firm takeover. Regarding the abnormal returns of acquirors and targets, I find that the acquiror returns are not significantly different between the in-house sample and the investment bank samples. The only exception occurs when both acquirors and targets use the in-house method, and under this special circumstance, the acquirors in the in-house sample obtain higher abnormal returns than the acquirors in the investment bank sample. In contrast, the abnormal returns of target firms in the in-house samples are significantly less than the abnormal returns of the target firms in investment bank samples as long as the target firms do not hire investment banks in acquisitions.