Do win-win outcomes exist? A study of cross-border M&A transactions in emerging markets

Winwin2Do win-win outcomes exist? A study of cross-border
M&A transactions in emerging markets

by Angel Liao and Jonathan Williams

Centr for Banking and FInance, Bangor Business School, University of Wales, Bangor Gwynedd, UK
LL57 2DG

Abstract

Between 1998 and 2005, we identify 74 cross-border
M&A transactions in which
international banks acquired ownership stakes in 46
 listed banks in emerging market
economies(EME).Atotalof$1,057,515millionofb
ankassetswasacquiredfor$38,172
millioninLatinAmerica,CentralandEasternEurop
e,andAsia.Usinganeventstudy
approach, there is scant evidence of win-win situat
ions when joint abnormal return is
positive. Whereas abnormal returns to targets are m
ostly positive and significant, they
tend to be offset by negative returns to acquiring
banks, which drives joint returns.
Econometricresultsfindnoevidencethatacquisiti
onofmajoritycontrolleadstohigher
abnormal returns to target banks; rather, the oppos
ite holds in banking which is
inconsistentwithevidencefromthenon-financials
ector.Ourevidenceimpliesthereare
considerableperceivedrisksassociatedwithexpand
ingbankingoperationsintoemerging
markets,whichaffectsstockmarketvaluationofcro
ss-borderM&A.Thus,theevidence
does not support suggestions of a transfer of wealt
h from shareholders in emerging
marketstotheircounterpartsinindustrialisedmar
kets.

Do win-win outcomes exist? A study of cross-border M&A transactions in emerging markets

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