Do Win-Win Outcomes Exist? A Study of Cross-Border M&A Transactions in Emerging Markets

Comparative Economic Studies, Vol. 50, pp. 274-296, June 2008

25 Pages Posted: 14 Sep 2010

See all articles by Xijuan Angel Bellotti

Xijuan Angel Bellotti

Middlesex University

Jonathan M. Williams

Bangor Business School, Bangor University

Date Written: June 1, 2008

Abstract

Between 1998 and 2005, we identify 73 cross-border bank mergers and acquisitions (M&A) transactions in which international banks acquired ownership stakes in 46 listed banks in emerging market economies (EME). A total of $797.5 billion of bank assets was acquired for $37.5 billion in Latin America, Central and Eastern Europe, and Asia. Using event study methods, we establish (1) whether the announcement of cross-border M&A transactions generates value for bank shareholders; and (2) whether M&A characteristics and/or economic and institutional features explain returns to bank shareholders in EME from cross-border investments. Consistent with US and European evidence, cross-border M&A creates value or significant abnormal returns for target bank shareholders. Yet, returns to shareholders at acquiring banks often exhibit value destruction; cross-border M&A activity in banking is not found to facilitate wealth redistribution from EME to industrialised countries. A regression analysis confirms the importance of the institutional and economic environment, as well as target bank profitability and the method through which international banks acquire ownership stakes, as significant determinants of abnormal returns.

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

JEL Classification: G21, G34

Suggested Citation

Bellotti, Xijuan Angel and Williams, Jonathan M., Do Win-Win Outcomes Exist? A Study of Cross-Border M&A Transactions in Emerging Markets (June 1, 2008). Comparative Economic Studies, Vol. 50, pp. 274-296, June 2008. Available at SSRN: https://ssrn.com/abstract=1676831

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

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

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