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Social Networks and the Informational Role of Financial Advisory Firms Centrality in Mergers and Acquisitions

Chaudhry, Amna Noor and Kontonikas, Alexandros and Vagenas‐Nanos, Evangelos (2021) 'Social Networks and the Informational Role of Financial Advisory Firms Centrality in Mergers and Acquisitions.' British Journal of Management. ISSN 1045-3172

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Abstract

This paper examines the role of the social network hierarchy of financial advisory firms in a mergers and acquisitions (M&As) framework. Financial advisors are information intermediaries who play an information extraction and information dissemination role. The more central the advisory firm is within the network of advisory firms, the greater their access to information flows. Our findings indicate that more central advisors are associated with higher acquirer announcement abnormal returns, higher abnormal combined returns and higher operating long‐run performance for the new entity. Central advisors also mitigate information asymmetries, resulting in lower premium paid by bidders. In return, more central advisory firms demand higher advisory fees, engage in higher M&A activity and are more likely to advise large acquirers and acquisitions of large and public deals. Our results are robust to endogeneity and self‐selection concerns.

Item Type: Article
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Elements
Date Deposited: 01 Mar 2021 08:51
Last Modified: 01 Mar 2021 08:51
URI: http://repository.essex.ac.uk/id/eprint/29903

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