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

Author

Listed:
  • 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.

Suggested Citation

  • Ignacio Hernando & María J. Nieto & Larry Wall, 2008. "Determinants of domestic and cross-border bank acquisitions in the European Union," Working Papers 0823, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:0823
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bank acquisitions; merger gains; probability of acquisition;

    JEL classification:

    • 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

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