Abstract
This paper analyzes the determinants of bank mergers and acquisitions (M&As) from a bank-level perspective. The main objective of the study is to identify those mutual characteristics of all banking institutions from Central and Eastern Europe that are prone to be acquired versus acquirer, or national versus cross-border. Using a database of more than 200 M&As transactions between 2000 and 2018 within Central and Eastern Europe, we document the main characteristics that influence the decision of merging, including the size of the bank, profitability, lending activities, liquidity, bank concentration, banking system stability, government effectiveness, regulatory quality, and the level of inflation. Higher effective average tax rate, which is associated with reduced tax avoidance, influences banks in a positive manner to be involved in the M&A process, findings that hold for targeted banks and domestic transactions. Furthermore, the analysis highlights the changes the financial crisis has projected on investors’ behavior.
Highlights
IntroductionBank mergers and acquisitions (M&As) can be analyzed from several perspectives, the two most important being the ones related to (i) geography (national versus cross-border) and (ii) the role played in the transaction (target/acquired versus acquirer/buyer)
Bank mergers and acquisitions (M&As) can be analyzed from several perspectives, the two most important being the ones related to (i) geography and (ii) the role played in the transaction
If we look at the medium- and long-term impact bank mergers and acquisitions could have in less developed countries, the results will most probably be different than the developed ones
Summary
Bank mergers and acquisitions (M&As) can be analyzed from several perspectives, the two most important being the ones related to (i) geography (national versus cross-border) and (ii) the role played in the transaction (target/acquired versus acquirer/buyer) Given these particularities, the step would be to identify the way they relate to certain microeconomic and macroeconomic characteristics and to what extent the bank’s profitability indicators, the structure, and size of the capital, or the level of market concentration and legal directions influence the inclusion in one of the two categories mentioned above. We suggest a different perspective, the starting point being the institutional and national proxies and their effect on the merger decision Taking this into account, we expect that larger banks and those with financial and operational struggles will have more chances to be part of a merger and acquisition as a target rather than acquirer. We sketch the typology of the banks which sooner or later will be targeted or acquired, by proposing the following hypotheses: Licensee MDPI, Basel, Switzerland
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