, Volume 36, Issue 2-3, pp 169-197
Date: 28 Oct 2008

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

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Abstract

This paper uses a unique database that includes deal and bank balance sheet information for 220 cross-border acquisitions between 1996 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 2 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.