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This paper investigates banks' conflicts of interest by focusing on a bank-directed transaction in a context of strong bank roles. Specifically, the author evaluates the extent to which Japanese banks expropriate from clients when they act as lenders and merger advisors simultaneously. The author's findings show a negative link between acquirers' wealth gain and their bank ties. Further results strongly implicate that banks arrange the mergers between their clients to improve their risk-based capital ratios. Overall, the paper demonstrates a mechanism for banks to use mergers to extract wealth from acquirers.
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