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Knowledge Spillover and Accounting Firms’ Competitive Strength in the M&A Advisory Market

Bilinski, P. ORCID: 0000-0002-0499-6429 and Yim, A. ORCID: 0000-0002-8063-6572 (2018). Knowledge Spillover and Accounting Firms’ Competitive Strength in the M&A Advisory Market (10.2139/ssrn.2695819). .

Abstract

Accounting firms participating in M&A advisory teams can leverage their knowledge accumulated through assurance services to give the teams a competitive advantage in advising on transactions with hard-to-value targets. Consistently, we document that bidders are more likely to select accounting firms to advise on transactions involving such targets. Knowledge spillover aids in estimating the target’s value, which translates into higher service quality offered by accounting firms as captured by higher acquirer announcement-period stock returns and lower likelihood of overpaying for the target. The effects we document are concentrated in cases when the accounting firm is the audit-specialist in the target’s industry or target’s auditor and the target has low reporting quality. Our results help explain why Thomson Reuters ranks accounting firms among top global advisors, particularly in the mid- and low-end M&A advisory market.

Publication Type: Monograph (Working Paper)
Publisher Keywords: accounting firms; non-audit services; knowledge spillover; industry expertise; financial advisors; mergers and acquisitions
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HF Commerce > HF5601 Accounting
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/21011
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