Who is more visionary in mergers: Commercial vs. investment banks

Early papers concerning bankers on board usually focus on the rationale of bank entry and such effects on company performance. Recently, Güner, Malmendier, and Tate (2008) started to look at the different effects of the bankers with different expertise on the investment strategy and post-entry performance of the firms on which they have board seats. This study extends this line of research to further examine the relationship between the change of different types of financial professionals’ equity holdings of acquiring firms prior to merger completion dates and these acquirers’ post-merger performance. Using 381 U.S. listed acquirers during 2000–2005, we find that the changes of the ownership of commercial banks and insurance companies are positively related to the acquirers’ short-term performance. However, only the changes of the ownership of investment bankers are negatively related to the bidders’ long-term performance, implying that, due to conflict of interests, investment bankers probably aim at the increase of the short-run post-merger performance of the acquiring companies of which they have relatively larger equity holdings.