Bankruptcy and international intervention: The case of Addiko bank

In 2014, the Austrian bank Hypo Group Alpe Adria was purchased by the American banking group Advent International, and the European Bank for Reconstruction and Development (EBRD) and re-branded as Addiko bank. In this paper, I explore how this purchase of Addiko Bank by an international multilateral development bank (MDB) affected exporting firms in Croatia. Using a difference-in-differences specification to investigate whether there was a meaningful effect of this turnover on firm performance, I find that the turnover of Addiko bank led to a $160,000 decrease in loans taken out by firms. However, this effect seems to occur immediately after the turnover, and vanishes over time. This effect is seen among domestically-owned firms and non-manufacturing firms, but not multinational affiliates and manufacturing firms. Additionally, I find no effect of this turnover on firm revenues. These results indicate that after an initial period of turmoil, the intervention by EBRD and Advent International had no lasting negative effects on firms in Croatia. The intervention by a MDB can help reform a financial sector and will not necessarily lead to detrimental effects at the micro-level.