This paper examines the impact of investment banks' prime brokerage connections to hedge funds on the choice of an advisor and the deal outcome in M&As. Acquirers are more likely to choose advisors connected to hedge funds that hold equity in the target before the deal announcement. Such connections increase the likelihood of deal completion and increase acquirer abnormal returns when target firms are characterised by a high degree of information asymmetry. This suggests an 'indirect toehold' mechanism of information transmission.

We develop a novel measure of effort and revisit the fundamental questions of asset management: how do incentives relate to effort; and how does effort affect performance? Using unique observations of daily work activity, we define mutual fund manager effort as the ratio of weekend work to weekday work. We find that investment advisors with stronger competitive incentives exert more effort on weekends. Focusing on within-advisor variation, we find that more effort follows poor performance, outflows and higher volatility. Regarding future performance, we show that more effort is associated with higher future returns, especially for mutual funds with strong competitive incentives, higher active share, and lower turnover. Finally, we demonstrate a causal link between effort and performance using exogenous variation in effort due to weather conditions.