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Determinants of domestic and cross-border bank acquisitions in the European Union

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Author Info

  • Ignacio Hernando

    ()
    (Banco de España)

  • María J. Nieto

    ()
    (Banco de España)

  • Larry Wall

    ()
    (Federal Reserve Bank of Atlanta)

Abstract

This paper analyzes the determinants of bank acquisitions both within and across countries in the EU-25 over the period 1997-2004. The findings of this paper are broadly in line with those of the academic literature on the subject, which are mainly based on the US experience. Our results suggest poorly managed EU-25 banks (high cost to income) are more likely to be acquired by other EU-25 banks, in the same country. Nevertheless, this underperformance of target banks does hold for cross border bank acquisitions only if compared to the median of the market. Larger banks are more likely to be acquired by other banks in the same country. The probability of being acquired by another bank in the same market is larger for banks that are quoted in the stock market, which is consistent with the disciplinary character of listing in the stock markets. Finally, banks operating in more concentrated markets are less likely to be acquired by other banks operating within the same country but are more likely to be acquired by banks in other EU-25 countries.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/08/Fic/dt0823e.pdf
File Function: First version, November 2008
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0823.

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Length: 37 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:bde:wpaper:0823

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Keywords: bank acquisitions; merger gains; probability of acquisition;

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References

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  1. Carbo Valverde, Santiago & Humphrey, David B. & Lopez del Paso, Rafael, 2007. "Do cross-country differences in bank efficiency support a policy of "national champions"?," Journal of Banking & Finance, Elsevier, vol. 31(7), pages 2173-2188, July.
  2. Hannan, Timothy H & Rhoades, Stephen A, 1987. "Acquisition Targets and Motives: The Case of the Banking Industry," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 67-74, February.
  3. Diaz, Belen Diaz & Olalla, Myriam Garcia & Azofra, Sergio Sanfilippo, 2004. "Bank acquisitions and performance: evidence from a panel of European credit entities," Journal of Economics and Business, Elsevier, vol. 56(5), pages 377-404.
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  6. Koetter, M. & Bos, J.W.B. & Heid, F. & Kolari, J.W. & Kool, C.J.M. & Porath, D., 2007. "Accounting for distress in bank mergers," Journal of Banking & Finance, Elsevier, vol. 31(10), pages 3200-3217, October.
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Citations

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Cited by:
  1. Robert DeYoung & Douglas Evanoff & Philip Molyneux, 2009. "Mergers and Acquisitions of Financial Institutions: A Review of the Post-2000 Literature," Journal of Financial Services Research, Springer, vol. 36(2), pages 87-110, December.
  2. Owen, Sian & Yawson, Alfred, 2010. "Human development and cross-border acquisitions," Journal of Empirical Finance, Elsevier, vol. 17(4), pages 689-701, September.
  3. Jens Hagendorff & Maria J. Nieto & Larry D. Wall, 2012. "The safety and soundness effects of bank M&A in the EU," Working Paper 2012-13, Federal Reserve Bank of Atlanta.
  4. Caiazza, Stefano & Clare, Andrew & Pozzolo, Alberto Franco, 2012. "What do bank acquirers want? Evidence from worldwide bank M&A targets," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2641-2659.
  5. Jens Hagendorff & Ignacio Hernando & María J. Nieto & Larry D. Wall, 2010. "What do premiums paid for bank M&As reflect? The case of the European Union," Banco de Espa�a Working Papers 1011, Banco de Espa�a.
  6. Stafano Caiazza & Andrew Clare & Alberto Franco Pozzolo, 2010. "What do foreigners want? Evidence from;targets in bank cross-border M&As," Mo.Fi.R. Working Papers 45, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  7. Jamal Al-Khasawneh, 2013. "Pairwise X-efficiency combinations of merging banks: analysis of the fifth merger wave," Review of Quantitative Finance and Accounting, Springer, vol. 41(1), pages 1-28, July.
  8. Vallascas, Francesco & Hagendorff, Jens, 2011. "The impact of European bank mergers on bidder default risk," Journal of Banking & Finance, Elsevier, vol. 35(4), pages 902-915, April.
  9. Pasiouras, Fotios & Tanna, Sailesh, 2010. "The prediction of bank acquisition targets with discriminant and logit analyses: Methodological issues and empirical evidence," Research in International Business and Finance, Elsevier, vol. 24(1), pages 39-61, January.
  10. Köhler, Matthias, 2010. "Transparency of regulation and cross-border bank mergers," ZEW Discussion Papers 08-009 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Jens Hagendorff & María J. Nieto & Larry D. Wall, 2012. "The safety and soundness effects of bank M&As in the EU: does prudential regulation have any impact?," Banco de Espa�a Working Papers 1236, Banco de Espa�a.
  12. Elena Beccalli & Pascal Frantz, 2013. "The Determinants of Mergers and Acquisitions in Banking," Journal of Financial Services Research, Springer, vol. 43(3), pages 265-291, June.
  13. Shim, Jungwook & Okamuro, Hiroyuki, 2011. "Does ownership matter in mergers? A comparative study of the causes and consequences of mergers by family and non-family firms," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 193-203, January.

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