Long Term Effects of Bank Acquisitions in Central and Eastern Europe
37 Pages Posted: 23 Aug 2007 Last revised: 12 Nov 2007
Date Written: August 20, 2007
We study the long term effects on the target banks of 84 bank acquisitions in 17 countries in Central and Eastern Europe and the Commonwealth of Independent States. Applying median difference tests we analyse the post merger gains in profitability and cost efficiency as well the expansion of the loan portfolios. Though the absolute values of profitability and efficiency of the target banks three years after the acquisition do not differ from those of domestic banks not involved in M&A activities, the improvements in performance and loan growth are significantly better in the post merger phase. Furthermore we investigate determinates explaining the individual changes of the target banks' characteristics. In contrast to prior research we can not confirm that western acquirer achieve a better post merger performance than domestic acquirer. Performance improvements are strictly positively related to the cost efficiency and profitability of the acquirer. Loan growth after the acquisition is mainly driven by country specific factors. Large acquirers from western countries with a strong economy seem to invest in targets located in nations with a high GDP growth and low corporate income tax rates.
Keywords: Eastern European banks, bank mergers
JEL Classification: G24, G21, G34
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