Bank Cross-Border Mergers and Acquisitions: Causes, Consequences, and Recent Trends



In the past 15 years, cross-border mergers and acquisitions have had an ever-increasing role in the process of bank internationalization. Although a consensus view has developed on the determinants of a bank’s decision to expand abroad and on the determinant of the patterns of expansion, the debate on the consequences of foreign bank presence is still open. The aim of this chapter is twofold. First, I discuss the major results of the literature studying the determinants and the patterns of bank foreign expansion. Second, I confront the available evidence with the most recent evolution in cross-border bank M&As. At the end I suggest some possible lines for future research.


Foreign Direct Investment Host Country Banking Sector Bilateral Trade Destination Country 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



I would like to thank Dario Focarelli for comments and suggestions on a previous version of the paper. Of course, all remaining errors and omissions are my responsibility.


  1. Affinito M, Piazza M (2009) What are borders made of? An analysis of barriers to European banking integration. Chapter 10. This volume.Google Scholar
  2. Allen F, Song WL (2005) Financial integration and EMU. European Financial Management 11: 7–24CrossRefGoogle Scholar
  3. Altunbas Y, Ibanez DM (2004) Mergers and Acquisitions and Bank Performance in Europe: The role of strategic similarities. European Central Bank Working paper Series 398Google Scholar
  4. Amel D, Barnes C, Panetta F, Salleo C (2004) Consolidation and efficiency in the financial sector: A review of the international evidence. Journal of Banking and Finance 28:2493–2519CrossRefGoogle Scholar
  5. Amihud Y, DeLong GL, Saunders A (2002) The effects of cross-border bank mergers on bank risk and value. Journal of International Money and Finance 21:857–877CrossRefGoogle Scholar
  6. Arena M, Reinhart CM, Vazquez F (2007) The lending channel in emerging economies: Are foreign banks different? IMF Working Paper No. 07/48, available at SSRN:
  7. Ball CA, Tschoegl AE (1982) The decision to establish a foreign branch or subsidiary: An application of binary classification procedures. Journal of Financial and Quantitative Analysis 17: 411–424Google Scholar
  8. Barajas A, Steiner R, Salazar N (2000) The impact of liberalization and foreign investment in Colombia’s financial sector. Journal of Development Economics 63:157–196CrossRefGoogle Scholar
  9. Bayraktar N, Wang Y (2005) Foreign bank entry and domestic banks’ performance: Evidence using bank-level data. Penn State University and World Bank, MimeoGoogle Scholar
  10. Bayraktar N, Wang Y (2006) Foreign bank entry, performance of domestic banks and the sequence of financial liberalization. World Bank Policy Research Working Paper 4019Google Scholar
  11. Berger AN (2007) obstacles to a global banking system: “Old Europe” versus “New Europe”. Journal of Banking and Finance 31:1955–1973CrossRefGoogle Scholar
  12. Berger AN, Buch CM, DeLong G, DeYoung R (2004) Exporting financial institutions management via foreign direct investment mergers and acquisitions. Journal of International Money and Finance 23:333–366CrossRefGoogle Scholar
  13. Berger AN, Dai Q, Ongena S, Smith DC (2003) To what extent will the banking industry be globalized? A study of bank nationality and reach in 20 European nations. Journal of Banking and Finance 27:383–415CrossRefGoogle Scholar
  14. Berger AN, DeYoung R, Genay H, Udell GF (2000) The globalization of financial institutions: Evidence from a cross-border banking performance. Brookings-Wharton Paper on Financial Service 2000:23–120CrossRefGoogle Scholar
  15. Berger AN, Klapper LF, Martinez Peria MS, Zaidi R (2007) Bank ownership type and banking relationships. Journal of Financial Intermediation 17(1):37–62CrossRefGoogle Scholar
  16. Blonigen BA (1997) Firm specific assets and the link between exchange rates and foreign direct investment. American Economic Review 87:447–465Google Scholar
  17. Bonin J, Abel I (2000) Retail banking in Hungary: A foreign affair? William Davidson Institute Working Paper no. 356Google Scholar
  18. Boot A (2009) The evolving landscape of banking. Chapter 7. This volume.Google Scholar
  19. Brealey RA, Kaplanis EC (1996) The determination of foreign banking location. Journal of International Money and Finance 15:577–597CrossRefGoogle Scholar
  20. Buch CM (2000) Why do banks go abroad? Evidence from German data. Journal of Financial Markets, Instruments and Institutions 9:33–67CrossRefGoogle Scholar
  21. Buch CM (2003) Information or regulation: What drives the international activities of commercial banks? Journal of Money Credit and Banking 35:851–869CrossRefGoogle Scholar
  22. Buch CM, DeLong G (2004) Cross-border bank mergers: What lures the rare animal? Journal of Banking and Finance 28:2077–2102CrossRefGoogle Scholar
  23. Cameron AC, Trivedi PK (1998) Regression analysis of count data. Cambridge University Press, CambridgeGoogle Scholar
  24. Claeys S, Hainz C (2007) Acquisition versus greenfield: The impact of the mode of foreign bank entry on information and bank lending rates. ECB Working Paper No. 653, available at SSRN:
  25. Campa JM, Hernando I (2006) M&As performance in the European financial industry. Journal of Banking and Finance 30:3367–3392CrossRefGoogle Scholar
  26. Choi S, Hasan I, Francis B (2007) Cross-border M&As and bank stability: Evidence from the bond market. Rensselaer Polytechnic Institute, New York, MimeoGoogle Scholar
  27. Cerutti E, Dell’Ariccia G, Martinez Peria MS (2007) How banks go abroad: Branches or subsidiaries? Journal of Banking and Finance 31:1669–1692Google Scholar
  28. Chang CE, Hasan I, Hunter WC (1998) Efficiency of multinational banks: An empirical investigation. Applied Financial Economics 8:689–696CrossRefGoogle Scholar
  29. Claessens S, Demirgüç-Kunt A, Huizinga H (2000) The role of foreign banks in domestic banking systems. In: Claessens S, Jansen M (eds) The internationalization of financial services: Issues and lessons for developing countries. Kluwer Academic Press, Boston, MAGoogle Scholar
  30. Claessens S, Demirgüç-Kunt A, Huizinga H (2001) How does foreign entry affect domestic credit market. Journal of Banking and Finance 25:891–911CrossRefGoogle Scholar
  31. Claessens S, Lee JK (2002) Foreign banks in low-income countries: Recent developments and impacts. The World Bank, MimeoGoogle Scholar
  32. Claessens S, van Horen N (2007) Location decisions of foreign banks and competitive advantage. Available at SSRN:
  33. Clarke G, Cull R, D’Amato L, Molinari A (1999) The effect of foreign entry on Argentina’s banking system. In: Claessens S, Jansen M (eds) The internationalization of financial services: Issues and lessons for developing countries. Kluer Academic Press, Dordrecht, The NetherlandsGoogle Scholar
  34. Clarke G, Cull R, Martinez Peria MS (2002) Does foreign bank penetration reduce access to credit in developing countries? Evidence from asking borrowers. World Bank, MimeoGoogle Scholar
  35. Cornett MM, Hovakimian G, Palia D, Tehranian H (2003) The impact of the manager: Shareholder conflict on acquiring bank returns. Journal of Banking and Finance 27:103–131CrossRefGoogle Scholar
  36. Cornett MM, McNutt JJ, Tehranian H (2006) Performance changes around bank mergers: Revenue enhancements versus cost reductions. Journal of Money, Credit, and Banking 38: 1013–1050CrossRefGoogle Scholar
  37. Crystal J, Dages BG, Goldberg L (2001) Does foreign ownership contribute to sounder banks? the Latin American experience. In: Litan R, Masson P, Pomerleano M (eds) Open doors: Foreign participation in financial systems in developing countries. Brookings Institution and the World Bank, Washington, DCGoogle Scholar
  38. Cull R, Martinez-Peria MS (2007) Foreign bank participation and crises in developing countries. World Bank Policy Research Working Paper 4128Google Scholar
  39. Cybo-Ottone A, Murgia M (2000) Mergers and shareholder wealth in European banking. Journal of Banking and Finance 24:831–859CrossRefGoogle Scholar
  40. De Felice G, Revoltella D (2003) Towards a multinational bank? European banks’ growth strategies. Banque and Marches 62Google Scholar
  41. De Long GL (2001) Stockholder gains from focusing versus diversifying bank mergers. Journal of Financial Economics 59:221–252CrossRefGoogle Scholar
  42. Demirguc-Kunt A, Levine R, Min H-G (1998) Opening to foreign banks: Issues of stability, efficiency, and growth. In: Lee S (ed) The implications of globalization of world financial markets. Bank of Korea, SeoulGoogle Scholar
  43. Focarelli D, Pozzolo AF (2001) The patterns of cross-border bank mergers and shareholdings in the OECD countries. Journal of Banking and Finance 25:2305–2337CrossRefGoogle Scholar
  44. Focarelli D, Pozzolo AF (2005) W. Journal of Business 78:2435–2463Google Scholar
  45. Focarelli D, Pozzolo AF (2008) Cross-border M&As in the financial sector: Is banking different from insurance? Journal of Banking and Finance 32:15–29CrossRefGoogle Scholar
  46. Focarelli D, Pozzolo AF, Salleo C (2008) Do M&As in the financial industry modify systematic risk? MimeoGoogle Scholar
  47. Garber P (2000) What you see vs. what you get: Derivatives in International Capital Flows. In: Adams C, Litan RE, Pomerleano M (eds) Managing financial and corporate distress: Lessons from Asia. Brookings Institution, Washington, DCGoogle Scholar
  48. Giannetti M, Ongena S (2007) Financial integration and entrepreneurial activity: Evidence from foreign bank entry in emerging markets. Review of Finance, forthcomingGoogle Scholar
  49. Goldberg LG (2002) When is foreign bank lending to emerging markets volatile? In: Edwards S, Frankel J (eds) Preventing currency crises in emerging markets. NBER and University of Chicago Press, ChicagoGoogle Scholar
  50. Goldberg LG (2007) Financial-sector FDI and host countries: New and old lessons. Federal Reserve Bank of New York Economic Policy Review March:1–17Google Scholar
  51. Goldberg LG, Johnson D (1990) The determinants of US banking activity abroad. Journal of International Money and Finance 9:123–137CrossRefGoogle Scholar
  52. Goldberg LG, Saunders A (1980) The causes of US bank expansion overseas: The case of Great Britain. Journal of Money Credit and Banking 12:630–643Google Scholar
  53. Goldberg LG, Saunders A (1981) The growth and organizational form of foreign banks in the US. Journal of Money Credit and Banking 13:365–374CrossRefGoogle Scholar
  54. Goldberg LG, Dages BG, Crystal J (2002) The lending cycles of banks in emerging markets: Foreign and domestic owners compared. Federal Reserve Bank of New York, MimeoGoogle Scholar
  55. Grosse R, Goldberg LG (1991) Foreign bank activity in the United States: An analysis by country of origin. Journal of Banking and Finance 15:1092–1112CrossRefGoogle Scholar
  56. Heston H, Summers R, Aten B (2006) Penn World Table Version 6.2. University of Pennsylvania, Center for International Comparisons of Production, Income and Prices, PennsylvaniaGoogle Scholar
  57. Levine R (1999) Foreign bank entry and capital control liberalization: Effects on growth and stability. University of Minnesota, MimeoGoogle Scholar
  58. Magri S, Mori A, Rossi P (2005) The entry and the activity level of foreign banks in Italy: An analysis of the determinants. Journal of Banking and Finance 29:1295–1310CrossRefGoogle Scholar
  59. Markusen JR, Venables AJ (1998) Multinational firms and the new trade theory. Journal of International Economics 46:183–203CrossRefGoogle Scholar
  60. Martinez Peria MS, Mody A (2004) How foreign participation and market concentration impact bank spreads: Evidence from Latin America. The World Bank, MimeoGoogle Scholar
  61. Mian A (2006) Distance constraints: The limits of foreign lending in poor economies. Journal of Finance 61:1465–1505CrossRefGoogle Scholar
  62. Micco A, Panizza U, Yanez M (2007) Bank ownership and performance. Does politics matter? Journal of Banking and Finance 31:219–241CrossRefGoogle Scholar
  63. Miller SR, Parkhe A (1998) Patterns in the expansion of US banks’ foreign operations. Journal of International Business Studies 29:359–390CrossRefGoogle Scholar
  64. Morgan D (2002) Rating banks: Risk and uncertainty in an opaque industry. American Economic Review 92:874–888CrossRefGoogle Scholar
  65. Nigh D, Cho KR, Krishnan S (1986) The role of location-related factors in US banking involvement abroad: An empirical analysis. Journal of International Business Studies 17:59–72Google Scholar
  66. Papi L, Revoltella D (2000) Foreign direct investment in the banking sector: A transitional economy perspective. In: Claessens S, Jansen M (eds) the internationalization of financial services: Issues and lessons for developing countries. Kluwer Academic Press, Boston, MAGoogle Scholar
  67. Piscitello L, Pozzolo AF (2006) Tendenze di internazionalizzazione del sistema bancario italiano nel contesto europeo. In: Onida F (ed) Internazionalizzazione e servizi finanziari per le imprese. Bancaria EditoreGoogle Scholar
  68. Sagari SB (1992) United States foreign direct investment in the banking industry. Transnational Corporations 3:93–123Google Scholar
  69. Stulz RM (2005) The limits of financial globalization. Journal of Finance 60:1595–1638CrossRefGoogle Scholar
  70. ter Wengel (1995) International trade in banking services. Journal of International Money and Finance 14:47–64Google Scholar
  71. Tschoegl AE (1983) Size, growth, and transnationality among the world’s largest banks. Journal of Business 56:187–201Google Scholar
  72. Tschoegl AE (2004) Who owns the major US subsidiaries of foreign banks? A note. International Financial Markets, Institutions and Money 14:255–266CrossRefGoogle Scholar
  73. Unite A, Sullivan M (2001) The impact of liberalization of foreign bank entry on the Philippine domestic banking market. Philippine Institute PASCN discussion paper no. 2001-08Google Scholar
  74. Ursacki T, Vertinsky I (1992) Choice of entry timing and scale by foreign banks in Japan and Korea. Journal of Banking and Finance 16:405–421CrossRefGoogle Scholar
  75. White H (1980) A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica 48:817–838CrossRefGoogle Scholar
  76. Williams B (1996) Determinants of the performance of Japanese financial institutions in Australia 1987–1992. Applied Economics 28:1153–1165CrossRefGoogle Scholar
  77. Williams B (1998) Factors affecting the performance of foreign-owned banks in Australia: A cross-sectional study. Journal of Banking and Finance 22:197–219CrossRefGoogle Scholar
  78. Wooldridge (2001) Econometric analysis of cross section and panel data. MIT Press, New YorkGoogle Scholar
  79. Yamori N (1998) A note on the location choice of multinational banks: The case of Japanese financial institutions. Journal of Banking and Finance 22:109–120CrossRefGoogle Scholar
  80. Yeyati EL, Micco A (2007) Concentration and foreign penetration in Latin American banking sectors: Impact on competition and risk. Journal of Banking and Finance 31:1633–1647CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  1. 1.Dipartimento di Scienze Economiche Gestionali e SocialiUniversità degli Studi del Molise, Via de Sanctis, sncItaly

Personalised recommendations