Private information, institutional distance, and the failure of cross-border acquisitions: Evidence from the banking sector in Central and Eastern Europe
Sumon Bhaumik (),
Oluwarotimi Owolabi and
Journal of World Business, 2018, vol. 53, issue 4, 504-513
In this paper, we develop an information theory-based framework about cross-border acquisitions in the financial intermediation industry. We argue that even though “soft” information embedded in customer relationships of local banks can, in principle, help multinational banks (MNBs) overcome informational disadvantage in host countries, the cost of verification of this private information may, paradoxically, make local banks with significant customer relationships unattractive for cross-border acquisition. Further, we propose that the relationship between the amount of customer information embedded in an incumbent bank and the likelihood of its acquisition by a MNB is modified by the institutional distance between the home and host countries of the MNB. Specifically, the strength of the negative relationship increases with institutional distance between home and host countries because the verification cost of private information increases with institutional distance. Our hypotheses find support in the context of Central and Eastern Europe.
Keywords: Multinational bank; Cross-border acquisition; Customer relationship; Private information; Verification cost; Institutional distance; Central and Eastern Europe (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:worbus:v:53:y:2018:i:4:p:504-513
Ordering information: This journal article can be ordered from
http://www.elsevier. ... 620401/bibliographic
Access Statistics for this article
Journal of World Business is currently edited by David Collings and Jonathan Doh
More articles in Journal of World Business from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().