Investment bank market share, contingent fee payments, and the performance of acquiring firms

This paper investigates the determinants of the market share of investment banks acting as advisors in mergers and tender offers. In both mergers and tender offers, bank market share is positively related to the contingent fee payments charged by the bank and to the percentage of deals completed in the past by the bank. It is unrelated to the performance of the acquirers advised by the bank in the past. In tender offers, the post-acquisition performance of the acquirer is negatively related to the contingent fee payments charged by the bank, suggesting that the contingent fee structure in tender offers ensures that investment banks focus on completing the deal. (C) 2000 Elsevier Science S.A. All rights reserved. JEL classification: G34.