Template-Type: ReDIF-Paper 1.0
Title: Strategic Communication Among Banks
Author-Name: Christian Bittner
Author-Email: christian.bittner@bundesbank.de
Author-Name: Falko Fecht
Author-Email:falko.fecht@bundesbank.de
Author-Name: Melissa Pala
Author-Email:melissa.pala@dhbw-karlsruhe.de
Author-Name: Farzad Saidi
Author-Email:saidi@uni-bonn.de

Classification-JEL: D22, G14, G20, G21, L14
Keywords: bank networks, trading, information transmission, mergers and acquisitions, syndicated lending

Abstract: Do economic incentives govern information diffusion in markets? Using international
banks’ advisory activities in corporate takeovers as their source of private
information, we show in supervisory data that banks with closer ties to the target,
but not the acquirer, advisor trade profitably in the target’s stock prior to the deal
announcement. This trading behavior is associated with a higher premium paid
by the acquirer without compromising the deal success. As the incentives of informed
traders are aligned only with those of the target shareholders, which are
represented by the target advisor, our evidence suggests strategic information transmission
among these banks.

Note: 
Length: 60
Creation-Date: 2024-08
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp587
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_587