Date of Award
Doctor of Philosophy (PhD)
Dr. Teofilo Ozuna
Dr. Alberto Davila
Dr. Ralph Carlson
Over the last few years, mergers and acquisitions within Latin America's banking sector have significantly increased. From 1995 to 2003, Latin American countries experienced more than one thousand bank merger and acquisition deals. The majority of these mergers and acquisitions have occurred between domestic and foreign banks and, as a result, foreign banks now control more than fifty percent of the banking assets of Latin America's largest economies. In addition to the increased presence of foreign banks in Latin America, the process of mergers and acquisitions has reduced the number of banks in most Latin American countries and this has lead to increased competition.
In the literature, it is recognized that the bank merger and acquisition process that has evolved in Latin America is distinct from the process that occurred in developed countries. First, bank mergers and acquisitions in Latin America have occurred mostly amongst domestic (Latin American) and foreign (US and European) banks, while in developed countries they have occurred mainly amongst the country's domestic banks. Second, the Latin American bank merger and acquisition process was primarily motivated by the need to avoid further financial crisis, while in the developed countries it was motivated by the need to reduce excess capacity. Lastly, in Latin America, government authorities initiated the merger and acquisition process, while in developed countries the process was market driven.
However, not much else is known regarding the effect of bank mergers and acquisitions in Latin America. As such, overall the objective of this study is to examine whether Latin American bank mergers and acquisitions are beneficial or not to Latin America. Specifically, this study contributes to the literature in three important aspects. First, this study presents evidence on the effect of Latin American bank mergers and acquisitions on shareholders' wealth. Second, it provides evidence on the effect of bank mergers and acquisitions on the risk of Latin American banks. Lastly, it provides evidence on the effect of bank mergers and acquisitions on the efficiency of Latin America banks.
The empirical analyses generated important findings regarding the effect of mergers and acquisitions on the wealth, risk, and efficiency of Latin American banks. First, the findings suggest that bank mergers and acquisitions lead to increased shareholder wealth in Latin America. The findings also show that large bank mergers do not yield greater wealth than small bank mergers but that cross-border bank mergers do create greater wealth than domestic bank mergers. Second, Latin American banks did not experience significant changes in risk due to mergers and acquisitions. The findings also reveal that neither large or small bank mergers nor cross-border or domestic bank mergers affect the risks of Latin American banks. Third, the results indicate that bank mergers and acquisitions increase the efficiency of Latin American banks. The results also indicate that large bank mergers are more efficient than small bank mergers and that cross-border bank mergers are not more efficient than domestic bank mergers.
University of Texas-Pan American