What Drives Acquisitions in the EU Banking Industry? The Role of Bank Regulation and Supervision Framework,Bank Specific and Market Specific Factors

We investigate the determinants of commercial bank acquisitions in the former fifteen countries of the European Union by evaluating the impact of bank‐specific measures, such as size, growth and efficiency of banks, and external influences reflecting industry level differences in the regulatory and supervision framework, market environment and economic conditions. Our empirical analysis involves multinomial logit estimation at various levels in order to identify those characteristics that most consistently predict targets and acquirers from a sample of over 1400 commercial banks. The overall results indicate that, relative to banks that were not involved in the acquisitions, (i) targets and acquirers were significantly larger, less well capitalized and less cost efficient, (ii) targets were less profitable with lower growth prospects, and acquirers more profitable with higher growth prospects, (iii) external factors have affected targets and acquirers differently, and their effects have not been consistent or robust to sample size changes.     

The impact of bank regulations, supervision, market structure, and bank characteristics on individual bank ratings: A cross-country analysis

We use country level data and bank level data from 71 countries and 857 banks to investigate the impact of bank regulations, supervision, market structure, and bank characteristics on individual bank ratings. The results indicate that less cost efficient banks, with higher than average levels of provisions relatively to their income, and lower liquidity tend to have lower ratings. Larger and more profitable banks tend to obtain higher ratings. Higher equity to assets ratio results in higher ratings only when we do not control for bank supervision and regulations. Capital requirements, restrictions on bank activities, official disciplinary power, explicit deposit insurance scheme, higher deposit insurer power, liquidity and diversification guidelines, entry requirements, fraction of entries denied, and economic freedom have a significant impact on ratings in all of our specifications. Disclosure requirements and foreign banks entry have a significant impact on ratings only when we simultaneously control for the regulatory environment and the market structure, while auditing requirements have a significant impact only when we control for the regulatory environment alone. Finally, banks in developed countries are assigned higher ratings. However, this impact disappears when we include the regulatory and supervision variables in the models.     

Predicting the equity premium with dividend ratios: Reconciling the evidence

This paper evaluates the ability of dividend ratios to predict the equity premium. We conduct an in and out-of-sample comparative study and apply the Goyal and Welch (2003) graphical method to equity premia derived from the UK FTSE All-Share and the S&P 500 indices. Preliminary in-sample univariate regressions reveal that in both markets the equity premium contains an element of predictability. However, the considered out-of-sample models outperform the historical moving average only in the UK context. This is confirmed by the graphical diagnostic which further indicates that dividend ratios are useful predictors of UK excess returns. Our paper provides a possible explanation of why dividend ratios might be more informative in the UK market by linking these findings to the disappearing dividend phenomenon. Finally, Campbell and Shiller (1988) identities are employed to account for the time-varying properties of the dividend ratio and dividend growth processes. It is shown that by instrumenting the models with the identities, forecasting ability can be further improved.     

The Effect of Board Size and Composition on the Efficiency of UK Banks

We examine a sample of 17 banking institutions operating in the UK between 2001 and 2006 to provide empirical evidence on the association between the efficiency of UK banks and board structure, namely board size and composition. Our approach is to use data envelopment analysis to estimate several measures of the efficiency of banks, and then to use panel data regressions for investigating the impact of board structure on efficiency. After controlling for bank size and capital strength, we find some evidence of a positive association between board size and efficiency, although this is not robust across all our specifications. Board composition, by contrast, has a robustly significant and positive impact on all measures of efficiency.     

Estimating the technical and scale efficiency of Greek commercial banks: The impact of credit risk, off-balance sheet activities, and international operations

This paper uses data envelopment analysis (DEA) to investigate the efficiency of the Greek commercial banking industry over the period 2000–2004. Our results indicate that the inclusion of loan loss provisions as an input increases the efficiency scores, but off-balance sheet items do not have a significant impact. The differences between the efficiency scores obtained through the profit-oriented and the intermediation approaches are in general small. Banks that have expanded their operations abroad appear to be more technical efficient than those operating only at a national level. Higher capitalization, loan activity, and market power increase the efficiency of banks. The number of branches has a positive and significant impact on efficiency, but the number of ATMs does not. The results are mixed with respect to variables indicating whether the banks are operating abroad through subsidiaries or branches.     

Regulations, Supervision Approaches and Acquisition Likelihood in the Asian Banking Industry

We investigate the association between the regulatory and supervision framework and the likelihood of being involved in acquisitions either as acquirer or target in the Asian banking industry over the period 1998–2004. The sample consists of 473 commercial banks operating in 9 markets, a total of 2,693 yearly observations. We use information from the new database of the World Bank and examine various regulations such as the level of accounting and information disclosure requirements, the restrictions on bank activities, the degree of official disciplinary power, and capital adequacy requirements. Our results suggest that the latter two influenced the probability of becoming a target or acquirer; however, restriction on activities and disclosure requirements had no impact on the acquisition likelihood.     

The impact of banking regulations on banks' cost and profit efficiency: Cross-country evidence

This paper uses stochastic frontier analysis to provide international evidence on the impact of the regulatory and supervision framework on bank efficiency. Our dataset consists of 2853 observations from 615 publicly quoted commercial banks operating in 74 countries during the period 2000-2004. We investigate the impact of regulations related to the three pillars of Basel II (i.e. capital adequacy requirements, official supervisory power, and market discipline mechanisms), as well as restrictions on bank activities, on cost and profit efficiency of banks, while controlling for other country-specific characteristics. Our results suggest that banking regulations that enhance market discipline and empower the supervisory power of the authorities increase both cost and profit efficiency of banks. In contrast, stricter capital requirements improve cost efficiency but reduce profit efficiency, while restrictions on bank activities have the opposite effect, reducing cost efficiency but improving profit efficiency.     

Strategic investment analysis for migration beyond 3G wireless networks

This paper analyzes investment alternatives for cellular operators who deploy either universal mobile telecommunications systems (UMTS) with high speed data packet access (HSDPA) networks or UMTS with Wi-Fi networks, for moving beyond 3G-networks. The evaluated business scenarios focus on two different deployment alternatives: UMTS with HSDPA and UMTS integrated with Wi-Fi. HSDPA deployment targets the overlay on the existing UMTS cells, whereas Wi-Fi covers only indoor hot spot areas where data demand is high. Capital investments and operational costs as well as revenue streams have been analyzed for the two types of network architectures. Techno-economic methodologies have been applied for this study and results are derived that are presented and discussed for two types of wireless networks.     

Do National Differences in Social Capital and Corporate Ethical Behaviour Perceptions Influence the Use of Collateral? Cross-Country Evidence

Journal of Business Ethics - We study the impact of social capital and perceptions about corporate ethical behaviour on the use of collateral in corporate borrowing. Using a dataset of more than...     

Financial supervision regimes and bank efficiency: International evidence

There exists a lively debate as for the appropriate architecture of the financial supervision regime, with a long list of theoretical advantages and disadvantages associated with each one of its key dimensions. The present study investigates whether and how bank profit efficiency is influenced by the central bank’s involvement in financial supervision, the unification of financial authorities, and the independence of the central bank. The results show that efficiency decreases as the number of the financial sectors that are supervised by the central bank increases. Additionally, banks operating in countries with greater unification of supervisory authorities are less profit efficient. Finally, central bank independence has a negative impact on bank profit efficiency.