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The Impact of M&As on Bank Performance

Cherie, Donna (2014) The Impact of M&As on Bank Performance.

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Abstract:The present study purposes to test the impact of mergers and acquisitions on bidder bank performance. The study is conducted using two methods, including event study method to measure stock performance and financial ratios analysis to measure accounting performance. Event study method analyzes the cumulative abnormal return around announcement date and completion date. Financial ratio analysis compares performance of the bidder bank before and after the merger and acquisition and explores the source of performance changes. The result of event study analysis shows negative but not significant performance changes of bidder banks following mergers and acquisitions. Deeper analysis to cross-border versus domestic acquisition and acquisition of listed target versus non-listed target also could not prove performance changes of bidder banks following mergers and acquisitions. Meanwhile, the financial ratio analysis shows statistically significant negative changes of performance of bidder banks following mergers and acquisitions. Industry-adjusted median return on equity statistically significant decrease at 3.15% level from 5.35% to 2.20%, in line with the significant decline of industry-adjusted mean return on equity at 4.76% level from 6.26% to 1.50%. Reduction of return on equity is caused by the reduction of earning diversification, the increase of cost, the increase of asset impairment, and the increase of liquidity risk. Keywords: Mergers and Acquisitions, Banking Industry, Event Study, Financial Ratio Analysis
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/65695
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