Discussion of The perverse effect of Investment Bank Ratings:Evidenc from M&A League Tables – Derrien & Dessaint Lammertjan Dam, University of Groningen

Summary Paper shows that patterns in M&A advisory mandates suggest a phenomenon labeled Table League Management Paper investigates whether Banks indeed manage their ranking. Reason is that it increases market share by being able to attract more future business. Authors indeed find evidence for Table League management | 2

General Comments Interesting topic, new to me. Well-written and well-motivated paper Quite polished version for a conference paper, easy to read. Paper exhibits effort in terms of different analyses to make the point. | 3

Specific Comments To what extent does the causality run as the authors suggest? Is it: 1. charge low fee => 2. Increase in ranking => 3. higher market share by attracting business Or 1. charge low fee => 2 a. attract more business => 2 b. and increase in ranking | 4

Specific comments Put differently, can all instuments that serve Table League Management not directly be classified as instruments that have to do with quality, thus increasing market share? Leading to a higher ranking at the same time? Ad 1. Even though the ranking is lagged Table 2, panel A does not include bank fixed effects. Hence it is likely to be largely a crossectional result. Table says: Banks with a high ranking on average are associated with larger average market shares. But are is there an underlying factor driving both ? | 5

Specific comments Table 2. Panel B is an improvement, but I am not sure whether the Deviation in rankings fully take care of this. (Again, sth else drives market shares and ranking.) My suggestion:If you want to show that an increase in ranking for a specific bank over time has increase market share, you should include fixed effects/take first differences of dependent and independent/show more lags. In short: I am not fully convinced that Table 2 tackles endogeneity/ reverse causality. Convince me that it is more than just showing that banks with a high ranking are contemporaneouslt associated with larger market shares. Maybe I misunderstood: In that case be more clear about the lags. | 6

Specific comments What is the main message of Table 3. Banks with a high rank are likely to be selected? Is this not saying that rankings move slowly? I like Tables 4- 7, to me this is more clear evidence of Table league management. Table 8 potentially suffers from the aforementioned problem. Indeed when you include bank fixed effects, you lose a lot significance. But even with fixed effects => quality of bank goes down => so do rankings and fees… What is perverse here? | 7

Minor Comments Table 2. If you have quarter dummies, how can you also have year dummies? P13. figure 1 should be figure 4. Table 10. Contrary what I said before, are you not interested in the crossection here? => Show without fixed effects too… | 8

Conclusion Having read the paper, I believe you do have some evidence for table league management However, you want to identify the incentives for table league management by linking it to market shares. There I am not fully convinced (yet). Suggestion: show that lagged change in rank affects change in market share, or sth in the same spirit. | 9

Conclusion I think that if you want to show the perverse effect of table leagues, do more analysis in line with table 10. Do you need market share story? Why cant the ranking itself be the main incentive? And show ranking is meaningless… To me the key is that activities that are rather useless, other than increasing the ranking and/or low in cost should be at the center of the analysis. That is why I am not convinced by the fees and/or market shares. On the other hand, you show in table 10 that ranking has no effect on the quality of the deals. This I like. | 10