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Selection and hidden bias in cross-border bank acquisitions: Ukraine’s takeover wave

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  • Muzaffarjon Ahunov

    ()
    (EBRD)

  • Leo Van Hove

    (Free University Brussels (VUB))

  • Marc Jegers

    (Free University Brussels (VUB))

Abstract

We investigate the impact of cross-border takeovers on the performance of target banks in Ukraine. We combine propensity score matching and a difference-in-difference methodology, checking for temporary unobservables. Acquirers mainly targeted large less-capitalised banks with average efficiency and profitability. After takeover, the cost efficiency of the acquired banks improved thanks to a decreased reliance on deposits but this did not result in higher profitability or higher loan market shares. Overall, our findings only tally piecemeal with the existing multi-country studies for transition economies.

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Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 162.

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Length: 44 pages
Date of creation: Oct 2013
Date of revision:
Publication status: Published in Working papers 162, European Bank for Reconstruction and Development
Handle: RePEc:ebd:wpaper:162

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Keywords: cross-border takeovers; bank performance; selection bias; hidden bias;

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  1. Gleb Lanine & Rudi Vander Vennet, 2007. "Microeconomic determinants of acquisitions of Eastern European banks by Western European banks," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 15(2), pages 285-308, 04.
  2. David A Grigorian & Vlad Manole, 2006. "Determinants of Commercial Bank Performance in Transition: An Application of Data Envelopment Analysis," Comparative Economic Studies, Palgrave Macmillan, vol. 48(3), pages 497-522, September.
  3. Christopher F. Baum & Mustafa Caglayan & Dorothea Schäfer & Oleksandr Talavera, 2008. "Political patronage in Ukrainian banking," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 16(3), pages 537-557, 07.
  4. Imbens, Guido & Abadie, Alberto, 2008. "On the Failure of the Bootstrap for Matching Estimators," Scholarly Articles 3043415, Harvard University Department of Economics.
  5. Lensink, Robert & Hermes, Niels, 2004. "The short-term effects of foreign bank entry on domestic bank behaviour: Does economic development matter?," Journal of Banking & Finance, Elsevier, Elsevier, vol. 28(3), pages 553-568, March.
  6. Caliendo, Marco & Kopeinig, Sabine, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," IZA Discussion Papers 1588, Institute for the Study of Labor (IZA).
  7. David A. Grigorian & Vlad Manole, 2002. "Determinants of Commercial Bank Performance in Transition," IMF Working Papers 02/146, International Monetary Fund.
  8. Bonin, John P. & Hasan, Iftekhar & Wachtel, Paul, 2004. "Bank performance, efficiency and ownership in transitition countries," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 7/2004, Bank of Finland, Institute for Economies in Transition.
  9. Berger, Allen N. & Clarke, George R.G. & Cull, Robert & Klapper, Leora & Udell, Gregory F., 2005. "Corporate governance and bank performance: A joint analysis of the static, selection, and dynamic effects of domestic, foreign, and state ownership," Journal of Banking & Finance, Elsevier, Elsevier, vol. 29(8-9), pages 2179-2221, August.
  10. Fries, Steven & Taci, Anita, 2005. "Cost efficiency of banks in transition: Evidence from 289 banks in 15 post-communist countries," Journal of Banking & Finance, Elsevier, Elsevier, vol. 29(1), pages 55-81, January.
  11. Tigran Poghosyan & Arsen Poghosyan, 2010. "Foreign bank entry, bank efficiency and market power in Central and Eastern European Countries," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 18(3), pages 571-598, 07.
  12. De Haas, Ralph & Ferreira, Daniel & Taci, Anita, 2010. "What determines the composition of banks' loan portfolios? Evidence from transition countries," Journal of Banking & Finance, Elsevier, Elsevier, vol. 34(2), pages 388-398, February.
  13. 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, Elsevier, vol. 36(9), pages 2641-2659.
  14. Stijn Claessens & Neeltje van Horen, 2011. "Foreign Banks: Trends, Impact and Financial Stability," DNB Working Papers, Netherlands Central Bank, Research Department 330, Netherlands Central Bank, Research Department.
  15. Degryse, Hans & Havrylchyk, Olena & Jurzyk, Emilia & Kozak, Sylwester, 2012. "Foreign bank entry, credit allocation and lending rates in emerging markets: Empirical evidence from Poland," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(11), pages 2949-2959.
  16. Gorodnichenko, Yuriy & Grygorenko, Yegor, 2008. "Are Oligarchs Productive? Theory and Evidence," IZA Discussion Papers 3282, Institute for the Study of Labor (IZA).
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