Abstract: Using the sample of China's A-share listed companies from 2006 to 2015, this paper investigates the impact of equity connections between firms and investment banks on merges and acquisitions (M&A) behavior. The empirical results indicate that equity connections between firms and investment banks can significantly enhance the probability of making acquisitions. Using a series of rigorous methods, we conclude that the results have a causal effect. Furthermore, we find that the effect of equity connections between firms and investment banks will be weakened in the state-owned enterprises. With respect to non-state-owned enterprises, the effect is still pronounced. In addition, the equity connections can also improve the accounting performance of M&A, but there is no significant impact on market performance. In general, the empirical results show that the equity connections between firms and investment banks contribute to M&A and can help firms to screen out more valuable M&A targets, but investors cannot distinguish a good M&A from a bad one.

Key words: mergers and acquisitions, investment bank, equity connection, acquisition probability, acquisition performance