This paper looks at the role of commercial banks and
investment banks as financial advisors. Unlike some
areas of investment banking, commercial banks have
always been allowed to compete directly with traditional
investment banks in this area. In their role as lenders
and advisors, banks can be viewed as serving a
certification function. However, banks acting as both
lenders and advisors face a potential conflict of
interest that may mitigate or offset any certification
effect. Overall, it is found that, in their merger and
acquisition advisory function, the certification effect
of commercial banks dominates the conflict of interest
effect and that the certification effect is particularly
strong when the target’s own bank advises merger
targets. pdf
