Cross-Border Bank Mergers : Who Gains and Why?

This paper examines the announcement effect of 96 international cross-border bank mergers between 1985 and 2005. Contrary to earlier evidence, transactions are found to be value-creating, albeit only on a net basis with target gains more than compensating for bidder losses. An inquiry into the determinants of abnormal returns reveals that bidders create most value when they take over targets that lack stand-alone growth prospects but are already relatively cost efficient ex-ante. As predicted by international management theory, bidder and target returns are also determined by country-specific factors. Finally, evidence suggests that announcements during hot Mamp;A markets reduce bidder and net wealth