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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26980
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| Title: | The Role of Banks in Takeovers |
| Authors: | Ivashina, Victoria
Nair, Vinay B.
Saunders, Anthony
Massoud, Nadia Ziad |
| Keywords: | Banks
Corporate Governance
Takeovers
Conflicts of Interest
Intermediaries |
| Issue Date: | Jan-2005 |
| Series/Report no.: | S-FI-05-01 |
| Abstract: | To transfer loans from one debtor to another debtor, banks might
transmit borrower information which is collected in the lending process
to potential acquirers. In this paper, we investigate the importance of
banks in the effectiveness of the takeover mechanism and hence in
corporate governance. Using unsolicited takeovers between 1992 and 2003,
we find that bank lending intensity and bank client network (the number
of firms that the bank deals with) have a significant and positive
effect on the probability of a borrower firm becoming a target. We find
that this effect is enhanced in cases where the target and acquirer have
a relationship with the same bank and is robust to the inclusion of
several firm characteristics including the presence of large external
shareholders. Moreover, takeover completion rates are positively related
to bank lending intensity. Finally, we find that the equity market views
takeovers where the target and the acquirer deal with the same bank more
positively relative to takeovers with no bank involvement. Overall, the
evidence supports the view that banks increase the disciplining role of
the market for corporate control. |
| URI: | http://hdl.handle.net/2451/26980 |
| Appears in Collections: | Financial Institutions
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