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Atlanta Fed Working Papers


Determinants of Domestic and Cross-Border Bank Acquisitions in the European Union

Ignacio Hernando, María J. Nieto, and Larry D. Wall
Working Paper 2008-26
December 2008

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This paper analyzes the determinants of bank acquisitions both within and across 25 members of the European Union (EU-25) during the period 1997–2004. Our results suggest that poorly managed banks (those with a high cost-to-income ratio) and larger banks are more likely to be acquired by other banks in the same country. The probability of being a target in a cross-border deal is larger for banks that are quoted in the stock market. Finally, banks operating in more concentrated markets are less likely to be acquired by other banks in the same country but are more likely to be acquired by banks in other EU-25 countries.

JEL classification: G21, G34

Key words: bank acquisitions, merger gains, probability of acquisition


The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Please address questions regarding content to Ignacio Hernando (corresponding author), Banco de España, Madrid 28014, Spain, 34 91 338 51 86, 34 91 338 56 78 (fax), hernando@bde.es; María J. Nieto, Banco de España, Madrid 28014, Spain, maria.nieto@bde.es; or Larry D. Wall, Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, GA 30309-4470, 404-498-8937, 404-498-8810 (fax), larry.wall@atl.frb.org.

For further information, contact the Public Affairs Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309-4470, 404-498-8020.