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Cross-Border Bank Acquisitions: Is there a Performance Effect?

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  • Ricardo Correa

Abstract

This paper uses a unique database that includes deal and bank balance sheet information for 220 cross-border acquisitions between 1994 and 2003 to analyze the characteristics and performance effects of international takeovers on target banks. A discrete choice estimation shows that banks are more likely to get acquired in a cross-border deal if they are large, bad performers, in a small country, and when the banking sector is concentrated. Post-acquisition performance for target banks does not improve in the first two years relative to domestically-owned financial institutions. This result is explained by a decrease in the banks' net interest margin in developed countries and an increase in overhead costs in emerging economies.
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  • 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.
    • Handle: RePEc:kap:jfsres:v:36:y:2009:i:2:p:169-197
    DOI: 10.1007/s10693-008-0043-6
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    1. Elena Beccalli & Pascal Frantz, 2013. "The Determinants of Mergers and Acquisitions in Banking," Journal of Financial Services Research, Springer;Western Finance Association, vol. 43(3), pages 265-291, June.
    2. Claessens, Stijn & van Horen, Neeltje, 2012. "Being a foreigner among domestic banks: Asset or liability?," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1276-1290.
    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. Stijn Claessens, 2017. "Global Banking: Recent Developments and Insights from Research," Review of Finance, European Finance Association, vol. 21(4), pages 1513-1555.
    5. Lehner, Maria, 2009. "Entry mode choice of multinational banks," Journal of Banking & Finance, Elsevier, vol. 33(10), pages 1781-1792, October.
    6. Marc Kouzez, 2021. "Foreign ownership and bank performance Evidence from French market," Economics Bulletin, AccessEcon, vol. 41(2), pages 834-847.
    7. Ngoc-Anh Vo Thi & Dev Vencappa, 2008. "Does the Entry Mode of Foreign Banks Matter for Bank Efficiency? Evidence from the Czech Republic,Hungary, and Poland," William Davidson Institute Working Papers Series wp925, William Davidson Institute at the University of Michigan.
    8. Claessens, Stijn & van Horen, Neeltje, 2012. "Being a foreigner among domestic banks: Asset or liability?," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1276-1290.
    9. 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.
    10. 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.
    11. Lehner, Maria, 2008. "Entry Mode Choice of Multinational Banks," Discussion Papers in Economics 8222, University of Munich, Department of Economics.
    12. Matias Huhtilainen & Jani Saastamoinen & Niko Suhonen, 2022. "Determinants of mergers and acquisitions among Finnish cooperative and savings banks," Journal of Banking Regulation, Palgrave Macmillan, vol. 23(3), pages 339-349, September.
    13. Malgorzata Iwanicz-Drozdowska & Pawel Smaga & Bartosz Witkowski, 2017. "Role of Foreign Capital in Stability of Banking Sectors in CESEE Countries," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(6), pages 492-511, October.
    14. Navío-Marco, Julio & Solórzano-García, Marta & Matilla-García, Mariano & Urueña, Alberto, 2016. "Language as a key factor of long-term value creation in mergers and acquisitions in the telecommunications sector," Telecommunications Policy, Elsevier, vol. 40(10), pages 1052-1063.
    15. Fergal McCann & James Carroll, 2019. "Observables and Residuals: Exploring Cross-Border Differences in SME Borrowing Costs," Journal of Financial Services Research, Springer;Western Finance Association, vol. 56(2), pages 167-184, October.
    16. 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.
    17. Wanke, Peter & Barros, Carlos P. & Faria, João R., 2015. "Financial distress drivers in Brazilian banks: A dynamic slacks approach," European Journal of Operational Research, Elsevier, vol. 240(1), pages 258-268.
    18. 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.
    19. Ahmad Bello Dogarawa, 2011. "Chronology of banking reforms in Nigeria," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 19(4), pages 370-382, November.
    20. Konara, Palitha & Tan, Yong & Johnes, Jill, 2019. "FDI and heterogeneity in bank efficiency: Evidence from emerging markets," Research in International Business and Finance, Elsevier, vol. 49(C), pages 100-113.
    21. Alin Marius ANDRIEȘ & Sabina CAZAN & Nicu SPRINCEAN, 2022. "The Nexus between Bank M&As and Financial Development," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 5-28, April.
    22. 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.
    23. 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.

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