The search for value: cross-border bank M&A in emerging markets

Williams, Jonathan and Bellotti, Xijuan (2008) The search for value: cross-border bank M&A in emerging markets. Comparative Economic Studies., 50 (2). pp. 274-296. ISSN 0888-7233

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Official URL: http://dx.doi.org/10.1057/ces.2008.2

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Abstract

Between 1998 and 2005, we identify 74 cross-border M&A transactions in which international banks acquired ownership stakes in 46 listed banks in emerging market economies (EME). A total of $1,057,515 million of bank assets was acquired for $38,172 million in Latin America, Central and Eastern Europe, and Asia. Using an event study approach, there is scant evidence of win-win situations when joint abnormal return is positive. Whereas abnormal returns to targets are mostly positive and significant, they tend to be offset by negative returns to acquiring banks, which drives joint returns. Econometric results find no evidence that acquisition of majority control leads to higher abnormal returns to target banks; rather, the opposite holds in banking which is inconsistent with evidence from the non-financial sector. Our evidence implies there are considerable perceived risks associated with expanding banking operations into emerging markets, which affects stockmarket valuation of cross-border M&A. Thus, the evidence does not support suggestions of a transfer of wealth from shareholders in emerging markets to their counterparts in industrialised markets.

Item Type:Article
Research Areas:Middlesex University Schools and Centres > Business School > Accounting and Finance
ID Code:4021
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Deposited On:16 Feb 2010 08:08
Last Modified:22 Jul 2014 04:26

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