Microeconomic determinants of acquisition in the banking industry of the Commonwealth of Independent States
2010
Badalyan, E.
The creation of the Commonwealth Independent States (CIS) brought the opportunity of liberalization and reconstruction of the banking industry in the member countries of this organization, which were previously members of the Soviet Union. In later years, starting in the 90s, banks were involved in different types of mergers and acquisitions, which were one of the mechanisms of the reconstruction of the banking sector. In this research we investigate the micro-determinants of acquisition likelihood in the CIS banking industry. During the sample construction we used 67 acquired banks during the period of 2000-2005 and all the other banks from this region. Then we used 30 acquired banks and randomly chose 30 non-acquired banks for the period 2000-2005. The final sample consisted of 60 banks from 10 countries and we estimated a binary logistic regression model for our model estimation. Using financial ratios we evaluated the relative influence of bank-specific characteristics on acquisition likelihood in the CIS banking industry. The basic result indicates that CIS banks with less risky assets are likely to be acquired. We also find that capital strength and growth influence the acquisition likelihood, while size, profitability, expenses management, liquidity and loan do not influence the acquisition likelihood.
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