Cross-Border Takeovers and Efficiency of Acquired Banks in Transition Economies: An Observational Study on Ukraine
41 Pages Posted: 1 Oct 2011
Date Written: September 29, 2011
We investigate the impact of cross-border takeovers on target banks’ profitability, efficiency, and market share in Ukraine, an exemplar of a country with poor institutional quality. We rely on a combination of propensity score matching with the difference-in-difference methodology, and our main contribution lies in an additional sensitivity analysis that checks for the presence of temporary unobservable factors. Our results show that foreign investors have acquired Ukrainian banks with average efficiency and profitability, and that these indicators did not change significantly post-takeover. By contrast, foreign banks have targeted mainly large banks, and during the first two years following acquisition the targets’ loan market share and size even increased, whereas funding costs decreased effects that are robust for the presence of temporary unobservable factors. In line with Lanine and Vander Vennet (2007), we thus find that foreign banks are interested in increasing their market share rather than exporting their efficiency.
Keywords: cross-border takeovers, bank performance, selection bias, hidden bias
JEL Classification: G15, G21, G34, F36
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