Strategic communication among banks

Christian Bittner, Falko Fecht, Melissa Pala, Farzad Saidi

Journal of Financial Economics · 2026 · Volume 184 · Issue 1

DOI: 10.1016/j.jfineco.2026.104338

Abstract

How do bank networks facilitate information flows that shape market outcomes? 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 without compromising deal success. As connected banks’ incentives are aligned only with target shareholders’ interests, which are represented by the target advisor, our evidence suggests that economic incentives determine which banks share information and with whom.

Keywords

Bank networks, Information transmission, Mergers and acquisitions, Syndicated lending, Trading

Enable JavaScript for citation tools and additional paper interactions.