Abstract
The main focus of this paper is to analyse the characteristics that trigger the likelihood of a bank being acquired on a sample of Croatian banks in the 2002-2014 period. Using logistic regression analysis, the authors tried to explore the characteristics of target banks that also disclose the motives for acquiring a particular bank. Therefore, various variables, typically found to be the most likely factors influencing bank takeovers, were introduced in the model. Specifically, variables ROA, ROE, capital adequacy ratio, growth rate, size, market share, ownership, leverage, capital to deposits ratio and net interest margin, were aimed to capture all important aspects of bank performance. The authors have employed Student's t test that showed the significance of the size and net interest margin variable in predicting acquired banks, whereas the findings of the logit analysis show that higher values of net interest margin increase a bank's attractiveness as an acquisition target. These analyses were performed on both ranked and unranked data set. However, the authors did not find the evidence that rank transformation increases predictive power of the model.
Highlights
The question of what drives mergers and acquisitions has intrigued many scientists over the years
The authors have employed Student's t test that showed the significance of the size and net interest margin variable in predicting acquired banks, whereas the findings of the logit analysis show that higher values of net interest margin increase a bank's attractiveness as an acquisition target
The results of logistic regression model for the unranked data set, as presented in Table 3, show that the likelihood of becoming a takeover bank is associated with higher values of capital adequacy ratio, size and net interest margin, and with lower values of return on assets (ROA), return on equity (ROE), growth rate, market share, leverage and equity to deposits ratio
Summary
The question of what drives mergers and acquisitions has intrigued many scientists over the years. There is a significant body of papers that examine the likelihood of becoming a potential target in M&A activities Most of those papers have focused on either the Anglo-American context Alcalde and Espitia, 2003; Tsagkanos et al 2006; Pasiouras and Tanna 2009) Since such studies are almost nonexistent regarding Central and Eastern European banking markets, the main goal of this paper is to show which motives drive M&A activities in the Croatian banking market which is operating in a different legal, institutional and regulatory environment and, in a that way, to complement the aforementioned studies. Taking into account the above set theories as well as considering the availability of data, the authors will try to find out what triggers mergers and acquisitions in the Croatian banking industry or to determine which factors make certain banks attractive takeover targets. The fifth section concludes with a summary of our results
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