Individual financial advisor's reputation concern and M&A performance: Evidence from China

Using a sample of mergers & acquisitions (M&A) undertaken by listed firms in China, this study examines whether and how the reputation concerns of individual financial advisors affect M&A outcomes. We find that acquiring firms tend to pay lower premium for the target in the M&A deals advised by individual financial advisors with higher reputation at stake. M&A deals advised by individual financial advisors with higher reputation concerns are more likely to be completed. Our results survive the endogeneity tests. Further analyses reveal that individual financial advisors with higher reputation concerns are positively associated with long-run post-M&A performance as well. Our findings indicate that reputation concerns play an important role in motivating individual financial advisors to deliver high-quality M&A advisory services. This study contributes to an emerging literature on the role of individual financial advisors in M&A activities.