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Rabih Radwan El Dana

DBA Graduate - 2019

Thesis title

Analysis of the Determinants and Impacts of Cross-Border Mergers and Acquisitions Evidence from the MENA Region Banking Sector


Ahmed A. El Masry-Externe
The foreign expansion of MENA banks (MBs) has proliferated in the last two decades. Accordingly, our study aims to assess the determinants and impacts of cross-border mergers and acquisitions (CBM&As) completed by MENA acquiring banks (MABs) between 2001 and 2015.First, we study the determinants of CBM&As and greenfield FDIs (GFDIs) executed by MBs. We classify them, as per the eclectic theory, into three types of advantages: ownership, locational and internalization. We apply the Poisson model in our analysis. Second, we assess the shareholder value effects of 41 CBM&As announced by MABs. We employ the event-study methodology and market model to compute the MABs’ abnormal returns (ARs). Then, we investigate the ARs’ determinants using a cross-sectional analysis. Finally, we examine the impact of 32 CBM&As on the MABs and foreign acquired banks’ performance. We derive the CBM&A performance change of banks by comparing their post-acquisition to their pre-acquisition industry-adjusted indicators. Afterwards, we check the performance changes’ determinants using Pearson correlation analysis.We found that MBs expand abroad mainly to benefit from the host countries’ market opportunities and regulatory changes. Moreover, CBM&As generate insignificant wealth to MABs. ARs are positively influenced by the acquirer’s size and the target’s solvency, but are negatively influenced by the MAB’s international experience and profitability level. Lastly, CBM&As have a positive but insignificant impact on the MABs and foreign target banks’ performance indicators.Throughout our research, we encountered many challenges, such as the scarcity of MENA related papers, and the delayed issuance and inconsistency of data across MENA countries. We overcame these issues by looking into multiple local and international data sources. At last, the lack of share price and financial data for some banks and market index data for some countries reduced the size of our sample; however, it is definitely acceptable compared to other studies.The results of our research are of utmost importance to regulators and banks in MENA. Central banks should introduce changes to their regulations and establish supervisory colleges to keep pace with the foreign expansion of banks. The latter should implement due diligence because CBM&As do not always lead to significant shareholder value and performance improvements.This is the first study to assess the determinants and impacts of CBM&As in MENA. It extends the use of the event-study methodology, operating performance approach and eclectic theory analysis to this region.