Do foreign bank investors promote acquirer bank value in Asia-Pacific countries?

Abstract

Mergers and acquisitions play a crucial part in global investment, particularly in the banking sector. We use comprehensive data on banks’ mergers and acquisitions in Asia-Pacific countries to investigate the performance implications of different types of foreign institutional investors holding equity stakes in acquirer banks. We find that acquirer banks with higher equity stakes from foreign bank investors experience an increase in their Q ratios, a proxy for bank value, and loan ratios in the three years post-acquisition when their income streams are diversified. By contrast, acquirer banks in which investment advisors or fund-type investors hold significant ownership stakes fail to expand their core business in the long run despite short-term cost reductions. Our findings suggest that bank-type foreign investors in Asia’s opaque banking industry improve acquirer bank performance through influential advisory functions.