Bank Mergers, Operational Efficiency, and Market Stability: A Cross-Country Analysis

Based on the case study of three decades of mergers and acquisitions (M&A) on the banking sector in 26 countries, this study assesses the effects of M&As on operational efficiency, market stability and transaction values. Econometric models such as linear regression and fixed effects were employed to analyze how regulatory frameworks, economic conditions and capital structure preference drive M&A outcomes in both developed and emerging markets. Results showed that economies which are developed typically have more stable M&A outcomes, with superior operational efficiency, and are well supported by strong regulatory system and strong financial infrastructure. Emerging markets, however, are dealing with different problems: lacking more efficient instruments and experiencing greater volatility, which underlines the need for more tailored forms of regulation. Capital structure variations also add evidence on the tendency of developed regions favoring equity financing, while in contrast, the developing regions prefer debt, resulting in higher financial risk. The implication is that region specific and adaptive regulatory policies in the context of M&A can amplify the positive effect of M&A on banking performance and economic resilience.