IDEAS home Printed from https://ideas.repec.org/a/eee/riibaf/v66y2023ics027553192300168x.html
   My bibliography  Save this article

Cross-border mergers and acquisitions by emerging country banks: What do acquisition premiums tell us?

Author

Listed:
  • Yildirim, Canan
  • Tensaout, Mouloud
  • Belousova, Veronika

Abstract

Our knowledge of international expansion motives and strategies of emerging country banks (ECBs) is limited. Using a worldwide sample of cross-border mergers and acquisitions (CBMAs) and a mixed model, we explore firm- and country-level determinants of acquisition premiums. We show that the effects of target bank and target country characteristics on premiums are contingent on the acquirer’s home country: emerging vs. advanced. More specifically, compared to advanced country acquirers, ECBs pay lower premiums for targets that are: (i) more efficient; (ii) offering better functional diversification opportunities; and (iii) based in markets with higher growth prospects or better institutional development levels. Furthermore, state-owned ECBs pay higher premiums. Our findings suggest that CBMAs undertaken by ECBs might not be motivated by competence-enhancing strategies while being less sensitive to the target country’s institutional development.

Suggested Citation

  • Yildirim, Canan & Tensaout, Mouloud & Belousova, Veronika, 2023. "Cross-border mergers and acquisitions by emerging country banks: What do acquisition premiums tell us?," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s027553192300168x
    DOI: 10.1016/j.ribaf.2023.102042
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S027553192300168X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ribaf.2023.102042?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hernando, Ignacio & Nieto, Mara J. & Wall, Larry D., 2009. "Determinants of domestic and cross-border bank acquisitions in the European Union," Journal of Banking & Finance, Elsevier, vol. 33(6), pages 1022-1032, June.
    2. Ricardo Correa, 2009. "Cross-Border Bank Acquisitions: Is there a Performance Effect?," Journal of Financial Services Research, Springer;Western Finance Association, vol. 36(2), pages 169-197, December.
    3. Dopico, Luis G. & Wilcox, James A., 2002. "Openness, profit opportunities and foreign banking," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 12(4-5), pages 299-320.
    4. Van Horen, Neeltje, 2007. "Foreign banking in developing countries; origin matters," Emerging Markets Review, Elsevier, vol. 8(2), pages 81-105, May.
    5. Dario Focarelli & Alberto Franco Pozzolo, 2005. "Where Do Banks Expand Abroad? An Empirical Analysis," The Journal of Business, University of Chicago Press, vol. 78(6), pages 2435-2464, November.
    6. Saiying (Esther) Deng & Elyas Elyasiani, 2008. "Geographic Diversification, Bank Holding Company Value, and Risk," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(6), pages 1217-1238, September.
    7. 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;Western Finance Association, vol. 36(2), pages 87-110, December.
    8. Amel, Dean & Barnes, Colleen & Panetta, Fabio & Salleo, Carmelo, 2004. "Consolidation and efficiency in the financial sector: A review of the international evidence," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2493-2519, October.
    9. Buch, Claudia M. & DeLong, Gayle, 2004. "Cross-border bank mergers: What lures the rare animal?," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2077-2102, September.
    10. Alvaro Cuervo-Cazurra & Mehmet Genc, 2008. "Transforming disadvantages into advantages: developing-country MNEs in the least developed countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(6), pages 957-979, September.
    11. Cui, Lin & Meyer, Klaus E. & Hu, Helen Wei, 2014. "What drives firms’ intent to seek strategic assets by foreign direct investment? A study of emerging economy firms," Journal of World Business, Elsevier, vol. 49(4), pages 488-501.
    12. Maung, Min & Shedden, Myles & Wang, Yuan & Wilson, Craig, 2019. "The investment environment and cross-border merger and acquisition premiums," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 19-35.
    13. Taboada, Alvaro G., 2011. "The impact of changes in bank ownership structure on the allocation of capital: International evidence," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2528-2543, October.
    14. Klaus E Meyer & Yuan Ding & Jing Li & Hua Zhang, 2014. "Overcoming distrust: How state-owned enterprises adapt their foreign entries to institutional pressures abroad," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(8), pages 1005-1028, October.
    15. Gulamhussen, Mohamed Azzim & Hennart, Jean-François & Pinheiro, Carlos Manuel, 2016. "What drives cross-border M&As in commercial banking?," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 6-18.
    16. Rossi, Stefano & Volpin, Paolo F., 2004. "Cross-country determinants of mergers and acquisitions," Journal of Financial Economics, Elsevier, vol. 74(2), pages 277-304, November.
    17. Chiaramonte, Laura & Dreassi, Alberto & Piserà, Stefano & Khan, Ashraf, 2023. "Mergers and acquisitions in the financial industry: A bibliometric review and future research directions," Research in International Business and Finance, Elsevier, vol. 64(C).
    18. Yadong Luo & Rosalie L Tung, 2007. "International expansion of emerging market enterprises: A springboard perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 481-498, July.
    19. Stewart R Miller & Arvind Parkhe, 1998. "Patterns in the Expansion of U.S. Banks' Foreign Operations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(2), pages 359-388, June.
    20. Kabongo, Jean D. & Okpara, John O., 2019. "Timing and speed of internationalization: Evidence from African banks," Journal of Business Research, Elsevier, vol. 102(C), pages 12-20.
    21. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
    22. Brian T. McCann & Andreas Schwab, 2023. "Bayesian Analysis in Strategic Management Research: Time to Update Your Priors," Strategic Management Review, now publishers, vol. 4(1), pages 75-106, May.
    23. Mateev, Miroslav & Andonov, Kristiyan, 2018. "Do European bidders pay more in cross-border than in domestic acquisitions? New evidence from Continental Europe and the UK," Research in International Business and Finance, Elsevier, vol. 45(C), pages 529-556.
    24. 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.
    25. Juan Alcácer & Wilbur Chung & Ashton Hawk & Gonçalo Pacheco-de-Almeida, 2018. "Applying Random Coefficient Models to Strategy Research: Identifying and Exploring Firm Heterogeneous Effects," Strategy Science, INFORMS, vol. 3(3), pages 533-553, September.
    26. Merz, Julia & Overesch, Michael & Wamser, Georg, 2017. "The location of financial sector FDI: Tax and regulation policy," Journal of Banking & Finance, Elsevier, vol. 78(C), pages 14-26.
    27. Magri, Silvia & Mori, Alessandra & Rossi, Paola, 2005. "The entry and the activity level of foreign banks in Italy: An analysis of the determinants," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1295-1310, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sun, Zeyu & Kong, Ningning & Wu, Lei & Bao, Yu, 2024. "Does contingent payment in M&As induce acquirers’ earnings management? Evidence from performance commitment," Research in International Business and Finance, Elsevier, vol. 69(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stefano Caiazza & Alberto Franco Pozzolo & Giovanni Trovato, 2014. "Do domestic and cross-border M&As differ? Cross-country evidence from the banking sector," Applied Financial Economics, Taylor & Francis Journals, vol. 24(14), pages 967-981, July.
    2. Yildirim, Canan & Efthyvoulou, Georgios, 2018. "Bank value and geographic diversification: regional vs global," Journal of Financial Stability, Elsevier, vol. 36(C), pages 225-245.
    3. 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.
    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. Vanwalleghem, Dieter & Yildirim, Canan & Mukanya, Anthony, 2020. "Leveraging local knowledge or global advantage: Cross border bank mergers and acquisitions in Africa," Emerging Markets Review, Elsevier, vol. 42(C).
    6. Kyung Yoon Kwon & Philip Molyneux & Livia Pancotto & Alessio Reghezza, 2024. "Banks and FinTech Acquisitions," Journal of Financial Services Research, Springer;Western Finance Association, vol. 65(1), pages 41-75, February.
    7. Stefano Caiazza & Alberto Franco Pozzolo & Giovanni Trovato, 2016. "Bank efficiency measures, M&A decision and heterogeneity," Journal of Productivity Analysis, Springer, vol. 46(1), pages 25-41, August.
    8. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.
    9. Gulamhussen, Mohamed Azzim & Hennart, Jean-François & Pinheiro, Carlos Manuel, 2016. "What drives cross-border M&As in commercial banking?," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 6-18.
    10. Mohamed Azzim Gulamhussen & Carlos Pinheiro & Alberto Franco Pozzolo, 2010. "Do multinational banks create or destroy economic value?," Mo.Fi.R. Working Papers 36, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
    11. Alberto Franco Pozzolo, 2009. "Bank Cross-Border Mergers and Acquisitions: Causes, Consequences, and Recent Trends," Springer Books, in: Alberto Zazzaro & Michele Fratianni & Pietro Alessandrini (ed.), The Changing Geography of Banking and Finance, edition 1, chapter 0, pages 155-183, Springer.
    12. Focarelli, Dario & Pozzolo, Alberto Franco, 2008. "Cross-border M&As in the financial sector: Is banking different from insurance," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 15-29, January.
    13. Caiazza, Stefano & Pozzolo, Alberto Franco, 2014. "The determinants of abandoned M&As in the banking sector," Economics & Statistics Discussion Papers esdp14074, University of Molise, Department of Economics.
    14. Papadimitri, Panagiota & Staikouras, Panagiotis & Travlos, Nickolaos G. & Tsoumas, Chris, 2019. "Punished banks' acquisitions: Evidence from the U.S. banking industry," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 744-764.
    15. Chiaramonte, Laura & Dreassi, Alberto & Piserà, Stefano & Khan, Ashraf, 2023. "Mergers and acquisitions in the financial industry: A bibliometric review and future research directions," Research in International Business and Finance, Elsevier, vol. 64(C).
    16. Caiazza, Stefano & Pozzolo, Alberto Franco, 2016. "The determinants of failed takeovers in the banking sector: Deal or country characteristics?," Journal of Banking & Finance, Elsevier, vol. 72(S), pages 92-103.
    17. Boubakri, Narjess & Dionne, Georges & Triki, Thouraya, 2008. "Consolidation and value creation in the insurance industry: The role of governance," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 56-68, January.
    18. Du, Kai & Sim, Nicholas, 2016. "Mergers, acquisitions, and bank efficiency: Cross-country evidence from emerging markets," Research in International Business and Finance, Elsevier, vol. 36(C), pages 499-510.
    19. Molyneux, Philip & Nguyen, Linh H. & Xie, Ru, 2013. "Foreign bank entry in South East Asia," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 26-35.
    20. Xie, En & Huang, Yuanyuan & Stevens, Charles E. & Lebedev, Sergey, 2019. "Performance feedback and outward foreign direct investment by emerging economy firms," Journal of World Business, Elsevier, vol. 54(6), pages 1-1.

    More about this item

    Keywords

    Emerging country banks; Mergers and acquisitions; Acquisition premium; Multi-level analysis; Comparative analysis; Mixed model;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s027553192300168x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ribaf .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.