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a b s t r a c tUsing a gravity model, we analyze the determinants of the probability that commercial banks in 89 acquiring countries and 118 target countries will undertake M&As over a 30-year period and of the value of these M&As. We find that the value of cross-border M&As increases with the size of the acquiring country, and that both the probability and value of M&As vary positively with the depth of the financial market in acquirer countries and the presence of corporate and non-corporate customers from acquiring countries in target countries, and negatively with the geographic, psychic, and time zone distances between acquirer and target countries. Our study highlights the role of non-corporate customers and of psychic distance in the cross-border expansion of commercial banks through M&As.

We follow agency theory to assess the influence of managerial ownership on the market value, performance, and risk of 123 listed banks in 23 countries included in the STOXX Global Index in 2007 and 2010. After controlling for bank characteristics, regulatory restrictions, and macroeconomic conditions, our findings show a positive relation between managerial ownership and both market value (Tobin's Q) and performance (ROA and ROE). Moreover, we find a negative relation between managerial ownership and risk (EDF, NPL/L, and Z‐SCORE). Bank market value and performance is a non‐linear, inverse U‐shaped function of managerial ownership. The negative relation between managerial ownership and bank risk is also non‐linear and U‐shaped. Our results remain robust to reverse causality. In their effort to immunize the global financial system from systemic risks, central banks and practitioners should find our results relevant for regulation purposes.

Multinational banks are a distinctive feature of today's globalized economy, with some institutions now operating in more than 100 countries. Despite the thorough analyses of bank internationalization over the last decades, the literature has failed to provide clear evidence that crossborder expansion is a profitable process from a firm's perspective. Following the long tradition of the analyses of the costs and benefits of focusing or diversifying the activities of a firm, in this paper we provide an answer to the question of whether bank cross-border diversification is value enhancing, comparing the value of internationally diversified commercial banks with that of more domestically focused intermediaries. Adapting the methodology of Laeven and Levine (2007), we measure a bank's excess value as the difference between its Tobin's q and the benchmark of multinational banks, and relate it to the degree of international diversification of its activities. In a large sample of more than 500 banks from 56 countries between 2001 and 2007, we find evidence of a statistically and economically significant diversification premium, that is robust to the use of different definitions of diversification, to the possible effects of outliers, and to controlling for potential endogeneity problems. Our results shown that the benefits of scale and scope economies generated by multinational banks more than offset the typical agency costs of managing larger and more complex companies, thus providing a strong rationale for the rapid growth in banks' international activities during the last couple of decades.

We question whether the international diversification of multinational banks creates or destroys shareholder value. Based on a sample of 384 listed banks from 56 countries we provide new and robust evidence that bank cross‐border activities create shareholder value, as shown by an economically and statistically significant premium for international diversification. Our results are confirmed controlling for bank fixed effects, time‐varying bank characteristics, reverse causality, functional diversification, and instrumenting for the choice to expand abroad. The increase in shareholder value is slightly larger for banks in the middle range of international diversification and in the case of expansion towards less developed countries.