Conflicts of interest between banks and firms: Evidence from Japanese mergers

This paper assesses conflicts of interest between banks and their client firms via the merger transaction by examining the wealth gain of merger acquirers who were listed on the Tokyo Stock Exchange in 1990–2004. The paper reports two main findings. First, acquiring firms did not gain from their acquisitions. Second, acquirers with stronger bank ties experienced larger wealth loss than those with weaker bank ties. These results are consistent with the hypothesis that banks played a conflicted role in mergers during the examination period.