STAPLED FINANCE: CONFLICTS OF INTEREST OR EFFICIENT CONTRACT? EMPIRICAL EVIDENCE

Abstract

This thesis examines the effects of stapled finance deals in mergers and acquisitions. The conventional wisdom is that dual role may create a conflicts of interest and self-serving financial intermediary may neglect interests of their clients in order to pursue their own interests. On the other hand, Povel and Singh (2009) argue that stapled finance may induce more bidding and increase the competition among the bidders which should raise the premium as a result. My results suggest that most of the differences in stapled and non-stapled finance transactions are explained by the firm and deal characteristics. Most importantly, stapled finance results in higher likelihood of positive wealth creation. Overall, I find no evidence supporting conflicts of interest and some evidence that stapled finance transactions are better for the two firms involved in the merger.