Abstract: The participation of investment banks in M&As can not only enhance the reputation of investment banks but also improve the efficiency of M&As. Based on the relational contract theory, this paper examines the role of investment banks in M&As by taking the listed companies of acquirers who conducted M&As in China’s Shanghai and Shenzhen Stock Exchanges from 2013 to 2016 as the research samples. The results show that the investment bank relationship established by the existing relational contract damages long-term and short-term M&A performance; the reputation of investment banks improves long-term M&A performance; the negative impact of investment bank relationship on M&A performance is more significant among investment banks with lower reputations. Low-efficiency M&As increase the degree of information asymmetry between external investors and acquired companies, which causes adverse selection and moral hazard issues in investment banks, and thus reduces the performance of M&As. This study reveals the influence of investment bank relationship and reputation on M&A performance, and provides empirical evidence and policy inspiration for government functional departments to improve the relevant systems, and further improve the market efficiency of investment banks in M&As.

Key words: investment bank relationship, investment bank reputation, M&A performance, relational contract