Cross-Border Bank Acquisitions: Is There a Performance Effect?
49 Pages Posted: 2 Apr 2008
Date Written: March 1, 2008
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
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