Microeconomic determinants of acquisitions of Eastern European banks by Western European banks

G. Lanine and Rudi Vander Vennet

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: A considerable number of Western European banks have acquired banks in Central and Eastern Europe from the mid-1990s onwards. The question is whether or not this will improve the efficiency and profitability of the Central and Eastern European banking sectors. We test the relative strength of the efficiency versus the market power hypotheses by investigating the bank-specific characteristics of the banks involved in the cross-border acquisitions. We also examine the determinants of the post-acquisition target banks’ performance. Our results indicate that large Western European banks have targeted relatively large and efficient CEEC banks with an established presence in their local retail banking markets. We find no evidence that cross-border bank acquisitions in the CEEC are driven by efficiency motivations. The evidence supports the market power hypothesis, raising concerns about the optimal balance between foreign ownership and competition.

Keywords: Mergers and acquisitions; cross-border acquisitions; bank efficiency; transition economies; Central and Eastern Europe (search for similar items in EconPapers)
JEL-codes: C30 E44 F21 G21 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2006-09
New Economics Papers: this item is included in nep-ban, nep-com, nep-eec, nep-eff and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:06/414

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