[Markus Fritsch, E-Finance Lab]

We study 56 cross-border M&A transactions that occurred between 1990 and 2005 that involved target banks from Central and Eastern European (CEE) and bidder banks from Western European countries and the US. The results of our event study support existing research regarding cross border transactions in the banking industry in that we do not find significant announcement effects for the bidder on average. Furthermore we investigate the determinants of individual bidder announcement effects with a special focus on emerging market characteristics. We find that standard factors explaining M&A success in developed markets, i.e. profitability, efficiency, and size hardly explain abnormal shareholder returns from bank M&A in emerging markets. Our results show that country and deal specific factors have significant explanatory power for excess returns to the bidding bank’s shareholder. It seems that a low economic freedom and thus high regulation as well as a low GDP growth in the target markets are key factors for value creation for bidding banks.