A Study On The Impact Of Financial Advisor Reputation On M&A Premiums

M&A is a major and complex investment decision and has become one of the essential ways to maximize the value of enterprises.The Central Economic Work Conference clearly defined the idea of “more mergers and reorganizations and fewer bankruptcy liquidations” for the five structural reform tasks in 2016,and the the overall trend of M&A events and the scale of M&A initiated by Chinese listed companies with policy support is increasing.However,the premium rate of domestic M&A restructuring has remained high in the past decade.Although high premiums can speed up the M&A process and complete the transaction smoothly,the resulting high costs may lead to subsequent operational risks and even adversely affect the post-merger performance.According to the regulations of the China Securities Regulatory Commission,companies engage financial advisors to formulate and gatekeep M&A plans during M&A activities.As an important player in the capital market,the intermediary role of financial advisors is closely related to their reputation and plays an important role in the reasonable payment of M&A premiums by companies.This paper attempts to explore the relationship between the reputation of financial advisors and M&A premiums of listed companies and the factors affecting the advantageous role of the reputation of financial advisors from the perspective of third-party intermediaries,to reveal the mechanism of the reputation mechanism of financial advisors in China to inhibit the high premium M&A of enterprises and provide references to alleviate the problem of high premium M&A,improve the efficiency of M&A pricing decisions and help enterprises to develop sustainably.Based on combing the current status of domestic and international research,this study integrates information asymmetry theory,reputation theory,embeddedness theory and external governance theory,and takes 652 large M&A transactions of listed companies in Shanghai and Shenzhen from 2016 to 2020 as the research sample.This study empirically explores the relationship between financial advisor reputation and M&A premium,as well as the moderating effects of relationship embeddedness and media supervision on the relationship between the two,and further grouping arguments according to the degree of inter-firm market competition and the nature of property rights.The empirical results show that: The empirical results show that:(1)The reputation of financial advisors is negatively correlated with M&A premiums,i.e.,financial advisors with higher reputation can provide higher quality consulting services in M&A activities and help M&A parties reasonably control M&A premiums;(2)Based on the perspective of relationship embeddedness,it is found that the stronger the negative relationship between the reputation of financial advisors and M&A premiums is when M&A parties and financial advisors have a cooperative relationship in the past;(3)Based on the external governance perspective,we find that media supervision can strengthen the negative relationship between financial advisor reputation and M&A premium;(4)In the sample of higher market competition and private enterprises,financial advisor reputation is significantly negatively related to M&A premium,and the strengthening effect of relationship embeddedness and media supervision on the negative relationship between financial advisor reputation and M&A premium is more significant.By exploring the relationship between financial advisor reputation and M&A premium of listed companies,this study broadens the research perspective related to M&A premium and extends the research boundary of the relationship between financial advisor reputation and M&A premium of listed companies in terms of relationship embeddedness and media supervision by combining embeddedness theory and external governance theory.The research results help firms to deeply understand the mechanism of financial advisor reputation and focus on the important influential roles of relationship embeddedness and media supervision,which are of great practical significance for listed companies to improve the efficiency of M&A pricing decisions.