What Do Foreigners Want? Evidence from Targets in Bank Cross-Border M&As

31 Pages Posted: 6 Nov 2010

See all articles by Stefano Caiazza

Stefano Caiazza

Università degli Studi di Roma Tor Vergata - Dipartimento di Economia e Finanza

Andrew Clare

City University London - Sir John Cass Business School

Alberto F. Pozzolo

Università del Molise - Dipartimento di Economia

Date Written: November 5, 2010

Abstract

Given the recent traumatic events in the world's banking industry it is important to understand what drives bankers to create larger and larger, often multinational, banking groups. In this paper we investigate whether the targets in cross-border bank M&As are materially different from those banks targeted in domestic M&A deals. To address this question we use a sample of over 24,000 banks from more than 100 countries. We begin by estimating the probability that a bank will be a M&A target; this probability is based upon both bank specific and country specific characteristics. The sample also naturally includes banks that were not involved in any M&A deal, this set of banks acts as a control sample for the study. We then estimate a multinomial model that distinguishes between (i) targets in domestic operations, (ii) targets in cross-border operations and (iii) non-targets. The main message of the paper is that, with few exceptions, domestic and foreign investors target similar banks. In particular, contrary to what one might expect, bank size does not affect differently the probability of being a domestic or a cross-border target, but it has a positive and highly significant effect in both cases. What differs between national and international M&As are the characteristics of the countries where banks operate. On average, banking systems characterized by lower leverage, higher cost inefficiency and lower liquidity are more likely to be targets of cross-border acquisitions, while none of this characteristics affects the likelihood of being acquired domestically.

Keywords: M&As, Bank, Bank Internationalization

JEL Classification: G15, G21, G34

Suggested Citation

Caiazza, Stefano and Clare, Andrew D. and Pozzolo, Alberto F., What Do Foreigners Want? Evidence from Targets in Bank Cross-Border M&As (November 5, 2010). Available at SSRN: https://ssrn.com/abstract=1703524 or http://dx.doi.org/10.2139/ssrn.1703524

Stefano Caiazza (Contact Author)

Università degli Studi di Roma Tor Vergata - Dipartimento di Economia e Finanza ( email )

Via Columbia 2
Roma, Roma 00100
Italy

Andrew D. Clare

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Alberto F. Pozzolo

Università del Molise - Dipartimento di Economia ( email )

Via De Sanctis
I-86100 Campobasso
Italy
+390874404198 (Phone)
+39087498043 (Fax)

HOME PAGE: http://dipeconomia.unimol.it/

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