Cross-Border Bank Acquisitions: Is There a Performance Effect?

49 Pages Posted: 2 Apr 2008

See all articles by Ricardo Correa

Ricardo Correa

Board of Governors of the Federal Reserve System

Date Written: March 1, 2008

Abstract

This paper uses a unique database that includes deal and bank balance sheet information for 220 cross-border acquisitions between 1994 and 2003 to analyze the characteristics and performance effects of international takeovers on target banks. A discrete choice estimation shows that banks are more likely to get acquired in a cross-border deal if they are large, bad performers, in a small country, and when the banking sector is concentrated. Post-acquisition performance for target banks does not improve in the first two years relative to domestically-owned financial institutions. This result is explained by a decrease in the banks' net interest margin in developed countries and an increase in overhead costs in emerging economies.

Keywords: Mergers and acquisitions, performance, international banking

JEL Classification: F21, F23, G21, G34

Suggested Citation

Correa, Ricardo, Cross-Border Bank Acquisitions: Is There a Performance Effect? (March 1, 2008). FRB International Finance Discussion Paper No. 922. Available at SSRN: https://ssrn.com/abstract=1115820 or http://dx.doi.org/10.2139/ssrn.1115820

Ricardo Correa (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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