Investment Bank Expertise in Cross-Border Mergers and Acquisitions

Abstract

We study the influence of country expertise of investment banks in facilitating cross-border merger deals by analyzing a large international sample of M&A deals. We provide evidence that the geographical proximity, cultural affinity, and local experience of investment banks advising bidding firms on cross-border M&A deals significantly decrease the time to completion required to complete the deal, significantly increase the probability of completion of the deal and the operating performance of the acquiring firm after the deal. The cultural affinity between the bank and the target country and the expertise of the acquirer on the target country have also a significant positive effect on the stock market reaction at the announcement of the deal. Our results are robust to firm, deal, country specific factors, and endogeneity concerns.