Do announcements of bank acquisitions in emerging markets create value?

Farouk Soussa and Tracy Wheeler

Bank of England working papers from Bank of England

Abstract: The latter half of the 1990s saw a sharp rise in entry of banks from developed countries into emerging market financial systems. This was motivated by, among other things, the belief that expansion into underdeveloped financial markets would result in diversification and efficiency gains, and thus prove to be value creating. This paper uses a standard event-study methodology to determine the reaction of the acquirer’s stock price to announcements of acquisitions in emerging financial markets (EFMs). Under the assumption of efficient markets, a positive reaction is interpreted as supporting the hypothesis that expansion into EFMs is value creating. However, in line with the literature on cross-border banking acquisitions in developed countries, announcements are found to be associated with negative abnormal returns for the acquirer, suggesting that potential downsides, such as operational risk, legal and social barriers, and political risk, are judged by markets to outweigh the potential benefits. Moreover, the value destruction from an acquisition was found to be bigger in all regions in the 18 months following the Asian crisis.

Date: 2006-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.bankofengland.co.uk/research/Documents/workingpapers/2006/WP315.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.bankofengland.co.uk/research/Documents/workingpapers/2006/WP315.pdf [301 Moved Permanently]--> https://www.bankofengland.co.uk/research/Documents/workingpapers/2006/WP315.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:315

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().