Cross-border bank mergers: What lures the rare animal?☆
Section snippets
Motivation
Domestic mergers and acquisitions (M&As) in banking have risen steadily for the past two decades. Yet, compared to the number of domestic bank mergers, international bank M&As have remained until recently relatively rare. Between 1985 and 2001, only about one-fifth of all bank mergers around the world involved partners headquartered in two different countries.
International M&As in banking: The rare animal
International mergers between financial institutions, it may seem, are one feature of the globalization of financial markets. Headline cases – such as the take-over of the US commercial bank Bankers Trust by the German Deutsche Bank in 1999, the acquisitions of US financial institutions by Japanese banks in the late 1980s,7 or the inroads of US investment banks into European financial markets –
Why should banks merge across borders?
The theoretical literature on the determinants of international banking has taken a fairly eclectic approach to the question of why banks should merge across borders.9 Empirical studies that examine
Why do banks merge across borders?
The goal of this paper is to determine the motivation for international bank mergers. For instance, we would like to know whether mergers tend to occur between banks that are geographically close or that share a common cultural background. We are also interested in knowing which banks are more likely to be targets. For example, are banks from developing countries more often targets or acquirers? To answer our questions, we use two main sets of regressions to analyze our data. We start with
Summary
Using an encompassing, novel dataset of more than 3000 international bank merger cases, which were announced and completed between 1985 and 2001, we have addressed two issues. First, we have asked to what extent regulatory factors and information costs affect bank merger decisions. To analyze this question, we have restricted the analysis to the second half of the 1990s while distinguishing banks from developed and from developing countries. Second, we have asked whether regulatory initiatives
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This paper has partly been written during a research visit of Claudia Buch at the National Bureau of Economic Research (NBER), Cambridge, MA. She would like to thank the NBER for its hospitality and the Volkswagen Foundation for financial support. Bjoern Christensen, Joerg Doepke, Joern Kleinert, Larry Wall, participants of seminars organized by the Swiss Finance Association, the European Central Bank and the Center for Financial Studies, the University of Kiel, the University Tor Vergata (Rome), and two anonymous referees have given most helpful comments. Saovanee Chantapong, Annemarie Grandke, Anja Kuckulenz, Anne C. Richter, and Jing Xie have provided most efficient research assistance. Any errors are solely the responsibility of the authors.
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