Do Investment Banks Matter for M&A Returns?

We document a significant investment bank fixed effect in the announcement returns of an Mamp;A deal. The inter-quartile range of bank fixed effects is 1.26%, compared to a full-sample average return of 0.72%. The results remain significant after controlling for the component of returns attributable to the acquirer. Our findings suggest that investment banks matter for Mamp;A outcomes, and contrast earlier studies which show no positive link between various measures of advisor quality and Mamp;A returns. Differences in average returns across banks are also persistent over time and predictable from prior performance. Clients do not chase past returns, which may explain why persistence exists in Mamp;A performance while it is absent in mutual funds