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Comparative Economic Studies

, Volume 50, Issue 2, pp 274–296 | Cite as

The Search for Value: Cross-border Bank M&A in Emerging Markets

  • Jonathan Williams
  • Angel Liao
Article

Abstract

Between 1998 and 2005, we identify 73 cross-border bank mergers and acquisitions (M&A) transactions in which international banks acquired ownership stakes in 46 listed banks in emerging market economies (EME). A total of $797.5 billion of bank assets was acquired for $37.5 billion in Latin America, Central and Eastern Europe, and Asia. Using event study methods, we establish (1) whether the announcement of cross-border M&A transactions generates value for bank shareholders; and (2) whether M&A characteristics and/or economic and institutional features explain returns to bank shareholders in EME from cross-border investments. Consistent with US and European evidence, cross-border M&A creates value or significant abnormal returns for target bank shareholders. Yet, returns to shareholders at acquiring banks often exhibit value destruction; cross-border M&A activity in banking is not found to facilitate wealth redistribution from EME to industrialised countries. A regression analysis confirms the importance of the institutional and economic environment, as well as target bank profitability and the method through which international banks acquire ownership stakes, as significant determinants of abnormal returns.

Keywords

mergers and acquisitions bank mergers event study abnormal return emerging markets 

JEL Classifications

G21 G34 

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Copyright information

© Palgrave Macmillan Ltd 2008

Authors and Affiliations

  • Jonathan Williams
    • 1
  • Angel Liao
    • 2
  1. 1.Business School, Bangor UniversityBangorUK
  2. 2.The Management School, University of EdinburghEdinburghUK

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