BRIC banks' overseas expansion: the impact on banks' stock prices from opening overseas branches

Abstract

Emerging markets are experiencing fast economic development, the especially in Brazil, Russia, India and China, which are so called BRIC nations. BRIC banking industry is facing a difficult decision, whether they should expand their business to western countries or focus on domestic markets. This paper tests the impact of overseas-branch opening announcements on the daily stock price of BRIC banks. Forty-six events in the past 10 years are examined in the test. The event study is used to measure abnormal returns around the announcement dates. The test results showed generally negative returns for BRIC banks as they announced the opening of overseas branches, but Chinese banks did generate positive returns. For BRIC nations, expanding their banking industry to other emerging countries seems to be a better alternative, if the bank is at the beginning stage of internalization.