The Evolution of Trust in the Relationship Between Investment Bank(Er)S and Their Clients a Mergers and Acquisitions Perspective
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Dissertation The Evolution of Trust in the Relationship Between Investment Bank(er)s and Their Clients A Mergers and Acquisitions Perspective Anirban Ash Email: [email protected] This doctoral thesis investigates the evolution of trust in investment bank(er)-client relationship in mergers and acquisitions by focusing on deals over EUR 1 billion. As sub-areas of research in- terest, this work explores the reasons responsible for the decline of trust in the research context, and also enquires if trust can be regained. The author’s findings indicate that the investment bank(er)-client relationship cannot exist wi- thout trust. The bank(er)-client relationship begins with Performance trust in the introductory phase, evolves to a stronger Experiential Performance trust in the second phase, and reaches at its zenith in the third phase i.e. the last phase of trust evolution. The third phase is quintessenti- ally marked by a situation in which a client is left with the choice of choosing either the invest- ment banker or the bank. The former concludes the evolution of trust in form of Superior Inter- personal trust, while the latter marks the end of the phenomenon with Superior Company trust. Scams, dishonesty and irresponsible behaviour, lack of transparency predictability and perfor- mance, can result in termination of trust. The authors’ findings suggest that regaining trust is possible at an organisational level, but not at an interpersonal level. Dedicated to my family I ACKNOWLEDGEMENTS I want to express my sincere gratitude to my supervisors Minister Prof. Dr. Andreas Pinkwart (Minister: Bundesrat and Chair holder: Deutsche Bank Chair of Innovation Management and Entrepreneurship), Prof. Dr. Arnis Vilks (Chair holder: Chair of Microeconomics), and Dr. Łukasz Świątczak (Executive Director: CASiM) for their kind support throughout this journey. In spite of their busy schedules, they always had time to answer my questions, and to support me with the research. I also consider myself fortunate and privileged to have received the wholehearted guidance and kind support of Prof. Stefanos Mouzas (Lancaster University Management School), and Prof. Stephan Henneberg (Queen Mary University London). Without their support, this research would never have been possible. I want to thank all my interview partners, in England and in Germany, for their cooperation. Their generous help with snowballing helped me to overcome one of the biggest obstacles – data collection. I also want to express my sincere gratitude to Friede Springer Stiftung for sponsoring my doctoral studies for three years. This research demanded meticulous work with transcription. I want to thank Katarzyna Bilska, for transcribing the data, and proofreading the thesis. Her punctilious effort and hard work made my life easy. I also want to express my special thanks to Dr. Jenny Nossack, Susanne Rost and Daniela Neumann for their help and support at different phases of this thesis. I regard my life, as a Friede Springer Doctoral Scholar, as the longest and the most eventful of all my journeys. It helped me to evolve as a person. I cannot thank Dr. Anja Hagedorn enough, for being the finest of all friends, and for always being there for me during the most difficult phases in the last three and a half years. I learned a lot from her, and this journey would have remained incomplete without the contribution from a fellow traveller like her. Contents List of figures ................................................................................................................. V List of tables .................................................................................................................. VI List of abbreviations .................................................................................................... VII Chapter I: Introduction .................................................................................................... 1 Chapter II: The background and motivation ................................................................... 5 2.1 Trust in investment banks: An overview of the present scenario ...................... 5 2.2 The M&A business, investment banker-client relationship, and trust ......... 10 2.3 The theoretical view on the research gap, and research questions .............. 19 Chapter III: Literature review ....................................................................................... 24 3.1 Defining trust as a concept ........................................................................... 24 3.2 A platform to comprehend the phenomenon of trust ................................... 26 3.2.1 Trust through the lens of transaction cost theory .................................. 26 3.2.2 Trust freedom, and vulnerability – an ethical perspective .................... 30 3.3 A theoretical framework to study the phenomenon of trust ........................ 33 3.4 Trust vs. time ............................................................................................... 46 3.4.1 Relationship life cycle ........................................................................... 47 3.4.2 The model of trust & distrust in relationship building .......................... 50 3.5 Trust and network approach......................................................................... 55 3.6 Epilogue ........................................................................................................... 58 Chapter IV: Methodology ............................................................................................. 59 4.1 Prologue: The choice of qualitative research as a methodological approach .. 59 4.1.1 Validity of qualitative research .................................................................. 60 4.1.2 Reliability, credibility and characteristics of qualitative research ............. 61 I 4.2 Phenomenology – studying a phenomenon ..................................................... 63 4.3 Sampling .......................................................................................................... 67 4.3.1 Judgement sampling .................................................................................. 67 4.3.2 Snowball sampling ..................................................................................... 69 4.4 Questionnaire ................................................................................................... 71 4.5 The data ........................................................................................................ 72 4.6 Epilogue of the methodological approach ................................................... 76 Chapter V: Analysis ...................................................................................................... 78 5.1 The coding manual ........................................................................................... 79 5.2 Coding technique for the first cycle ................................................................. 81 5.3 Recoding and categorising – Second cycle ...................................................... 84 5.4 Post- second cycle coding findings .................................................................. 89 5.5 Does the research require a third cycle coding? .............................................. 91 5.6 Data saturation in qualitative interviews .......................................................... 92 5.6.1 Factors determining data saturation ...................................................... 93 5.6.2 Guidelines on the size of the sample ..................................................... 94 Chapter VI: Results ....................................................................................................... 97 6.1 Prologue ........................................................................................................... 97 6.1.1 The ‘pre-relationship’ stage in a ‘successful’ bank(er)-client relationship 98 6.1.2 The constructs of goodwill at the “pre-relationship” phase .................... 101 6.2 Exordium – The introduction phase ............................................................... 108 6.3 Incrementum – The growth/build-up phase ................................................... 112 6.4 Maturitatem – The maturity phase ................................................................. 114 6.4.1 Situation 1: Superior interpersonal trust .................................................. 115 II 6.4.2 Situation 2: Superior company trust ........................................................ 120 6.5 How does trust evolve in an investment bank(er)-client relationship? .......... 124 6.6 Declino – The decline phase: The sub-areas of research interest .................. 128 6.6.1 Scams ....................................................................................................... 129 6.6.2 Living up to the expectations ................................................................... 134 6.6.3 Issue with additional services .................................................................. 136 6.6.4 Transparency and predictability .............................................................. 138 6.6.5 Can trust be regained? – A contextual question ...................................... 139 Chapter VII: Discussion of results .............................................................................. 144 7.1 A pragmatic approach in relation to the research gap .................................... 144 7.2 Transaction cost theory and a ‘free’ perspective ..........................................