The Search for Value: Cross-Border M&A Transaction in Emerging Markets

FRONTIERS OF BANKS IN A GLOBAL WORLD. p. 48, Palgrave, 2007

Posted: 14 Sep 2010

See all articles by Jonathan M. Williams

Jonathan M. Williams

Bangor Business School, Bangor University

Xijuan Angel Bellotti

Middlesex University

Date Written: July 7, 2007

Abstract

Between 1998 and 2005, we identify 74 cross-border M&A transactions in which international banks acquired ownership stakes in 46 listed banks in emerging market economies (EME). A total of $1,057,515 million of bank assets was acquired for $38,172 million in Latin America, Central and Eastern Europe, and Asia. Using an event study approach, there is scant evidence of win-win situations when joint abnormal return is positive. Whereas abnormal returns to targets are mostly positive and significant, they tend to be offset by negative returns to acquiring banks, which drives joint returns. Econometric results find no evidence that acquisition of majority control leads to higher abnormal returns to target banks; rather, the opposite holds in banking which is inconsistent with evidence from the non-financial sector. Our evidence implies there are considerable perceived risks associated with expanding banking operations into emerging markets, which affects stockmarket valuation of cross-border M&A. Thus, the evidence does not support suggestions of a transfer of wealth from shareholders in emerging markets to their counterparts in industrialised markets.

Keywords: Mergers and acquisitions, bank mergers, event study, abnormal return, emerging markets

JEL Classification: G21, G34

Suggested Citation

Williams, Jonathan M. and Bellotti, Xijuan Angel, The Search for Value: Cross-Border M&A Transaction in Emerging Markets (July 7, 2007). FRONTIERS OF BANKS IN A GLOBAL WORLD. p. 48, Palgrave, 2007. Available at SSRN: https://ssrn.com/abstract=1676824

Jonathan M. Williams (Contact Author)

Bangor Business School, Bangor University ( email )

Bangor, Wales LL57 2DG
United Kingdom

HOME PAGE: http://www.bangor.ac.uk/%7Eabs056/main.htm

Xijuan Angel Bellotti

Middlesex University ( email )

The Burroughs
London, NW4 4BT
United Kingdom
0208-411-5705 (Phone)

HOME PAGE: http://www.mdx.ac.uk/aboutus/staffdirectory/xijuan_bellotti.aspx

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