What Do Foreigners Want? Evidence from Targets in Bank Cross-Border M&As
31 Pages Posted: 6 Nov 2010
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: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Diversification and the Cost of Debt of Bank Holding Companies
By Saiying Deng, Elyas Elyasiani, ...
-
Diversification and the Cost of Debt of Bank Holding Companies
By Saiying Deng, Elyas Elyasiani, ...
-
Geographic Diversification, Bank Holding Company Value, and Risk
By Saiying Deng and Elyas Elyasiani
-
Are Universal Banks Better Underwriters? Evidence from the Last Days of the Glass-Steagall Act
By Dario Focarelli, David Marques-ibanez, ...
-
Are Universal Banks Better Underwriters? Evidence From the Last Days of the Glass-Steagall Act
By Dario Focarelli, David Marques-ibanez, ...
-
Are Domestic and Cross-Border M&As Different? Cross-Country Evidence From the Banking Sector
By Stefano Caiazza, Alberto F. Pozzolo, ...
-
Do Multinational Banks Create or Destroy Economic Value?
By Azzim Gulamhussen, Carlos Manuel Pinheiro, ...
-
Do Multinational Banks Create or Destroy Economic Value?
By Carlos Manuel Pinheiro, Azzim Gulamhussen, ...
-
Can Banks in Emerging Economies Benefit from Revenue Diversification?
By Sarah Sanya and Simon Wolfe
-
By Giorgio Barba Navaretti, Giacomo Calzolari, ...