Determinants of Domestic and Cross-Border Bank Acquisitions in the European Union

38 Pages Posted: 6 Nov 2008

See all articles by Ignacio Hernando

Ignacio Hernando

Banco de España

Maria Nieto

Banco de España

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: November 7, 2008

Abstract

This paper analyzes the determinants of bank acquisitions both within and across countries in the EU-25 over the period 1997-2004. The findings of this paper are broadly in line with those of the academic literature on the subject, which are mainly based on the US experience. Our results suggest poorly managed EU-25 banks (high cost to income) are more likely to be acquired by other EU-25 banks, in the same country. Nevertheless, this underperformance of target banks does hold for cross border bank acquisitions only if compared to the median of the market. Larger banks are more likely to be acquired by other banks in the same country. The probability of being acquired by another bank in the same market is larger for banks that are quoted in the stock market, which is consistent with the disciplinary character of listing in the stock markets. Finally, banks operating in more concentrated markets are less likely to be acquired by other banks operating within the same country but are more likely to be acquired by banks in other EU-25 countries.

Keywords: Bank acquisitions, Merger gains, Probability of acquisition

JEL Classification: G21, G34

Suggested Citation

Hernando, Ignacio and Nieto, Maria J. and Wall, Larry D., Determinants of Domestic and Cross-Border Bank Acquisitions in the European Union (November 7, 2008). Paolo Baffi Centre Research Paper No. 2008-33; Banco de Espana Working Paper No. 0823. Available at SSRN: https://ssrn.com/abstract=1295883 or http://dx.doi.org/10.2139/ssrn.1295883

Ignacio Hernando

Banco de España ( email )

Madrid 28014
Spain
+34 91 338 5186 (Phone)
+34 91 338 5678 (Fax)

Maria J. Nieto (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8937 (Phone)
404-498-8956 (Fax)

HOME PAGE: http://www.frbatlanta.org/econ_rd/bios/wall.htm

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