Dose mergers and acquisitions significantly impact the performance of banks in long run? A pre and post CAMEL study of banking in Pakistan

Keywords: Acquisition, Banking, CAMEL Ratios, Long Run, Merger.

Abstract

The competition among corporates to become market leader is not only with in economy but also it is global and it effects the organizations in a positive or in a negative way as well in such a challenging and rapid environment Merger & Acquisition (M&A) is one of the best ways to enhance the capital, customers, and profitability. This paper is based on the CAMEL (Capital Adequacy, Asset Quality, Management Soundness, Efficiency and Liquidity Ratios) framework. Overall, twenty-five ratios before and after merger included on nine year pre and nine-year post were collected/ calculated and analyzed with SPSS and E-Views. Paired Sample T test were calculated and analyzed with the use of SPSS and structural break down test with the use of E-Views. The research after testing and analysis with software conclude that banks in long run shows significant difference in Capital adequacy ratios and Asset Quality and shows better Capital Adequacy and Asset Quality Ratios after merger among the five ratios tested.

Downloads

Download data is not yet available.

Author Biographies

Muhammad Raghib Zafar, University of Sindh, Pakistan.

PhD. Scholar IBA, University of Sindh, Pakistan.

Abdul Sattar Shah, University of Sindh, Pakistan.

Professor (PhD Supervisor) Director IBA, University of Sindh, Pakistan.

References

Afza, T. and Yusuf, M.U. (2012), The impact of mergers on efficiency of banks in Pakistan. Elixir International Journal: Finance Management, 48(2012), 9158-9163.

Ahmad, A., Rehman, K., Saif, M. I. & Safwan, M.N. (2010). An Empirical Investigation of Islamic Banking in Pakistan based on Perception of Service Quality, African Journal of Business Management, 4(6), 1185-1193.

Awan, A.G., & Azhar, M. (2014). Consumer Behaviour towards Islamic Banking. European Journal of Accounting, Auditing and Finance Research, Vol 2(9), 42-65.

Bauer, F., Matzler, K., & Wolf, S. (2014). M&A and innovation: The role of integration and cultural differences. International Business Review, 11.

Burki, A.A., & Niazi, G.S.K. (2003). The Effects of Privatization, Competition and Regulation on Banking Efficiency in Pakistan, 1991-2000, Presented at CRC Conference on: Regulatory Impact Assessment: Strengthening Regulation and Practice, University of Manchester, U.K.

Byard, D., & Cebenoyan, F. (2007). Alternative evidence on financial analysts’ use of financial statement information. Review of Accounting and Finance Journal, 6(4), 442-459.

Chapman, K. (2003, Jully 1). Cross‐border mergers/acquisitions: a review and research agenda. Journal of Economic Geography, 3(3), 309-334. doi: https://doi.org/10.1093/jeg/3.3.309

Charnes, A., Cooper, W. W. & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research, 2, 429-444.

Clark, R., Robert, C., & Mary, S. (2003). Empirical Studies of Bank Privatization: An Overview. Conference on Bank Privatization, (pp. 20-21). World Bank. Retrieved 2021.

Dymski, G.A. (2002), The global bank merger wave: implications for developing countries. The Developing Economies, 5(23) XL-4 435–66. DOI: https://doi.org/10.1111/j.1746-1049. 2002.tb00922.x

Hassan, M. (2007). The Islamization of the Economy and the Development of Islamic Banking in Pakistan, Kyoto Bulletin of Islamic Area Studies, 1(2), 92-109.

Hussain, I. (2006). Evolution of Islamic Banking, Journal of Islamic Banking and Finance 23(3), 73-79

Imaa. (2021). Imaa Statistics. Retrieved from https://imaa-institute.org/mergers-and-acquisitions-statistics/

Kaur, J., Kaur, H.V & Vineet, H. (2016). Camel analysis of selected public sector Banks. Gian Jyoti E-Journal, 6(3).

Khalid, U. (2006). The Effect of privatization and liberalization on banking sector performance in Pakistan. SBP Research Bulletin, 2(2).

Khan, A. A. (2011), Merger and Acquisitions (M&As) in the Merger and Acquisitions (M&As) in the Liberalization Regime. International Journal of Contemporary Business Studies, 2(11)

La Porta, R., Florencio, L., & Andrei, S. (2002). Government Ownership of Banks. Journal of Finance, 57, 265-301.

Martynova, M., & Renneboog, L. (2008). A century of corporate takeovers: What have we learned and where do we stand? Journal of Banking & Finance, 32(10), 2148-2177. doi: https://doi.org/10.1016/j.jbankfin.2007.12.038

Ministry of Finance, Government of Pakistan (2020). Economic Survey of Pakistan. http://www.finance.gov.pk/survey_0708.html

Mumcu, A., & Zenginobuz, E.U. (2015). An Analysis of Mergers and Acquisitions in the Turkish Banking Sector. Research in Middle East Economics, Vol. 6, 133-162. Published online: 08 Mar 2015; http://dx.doi.org/10.1016/S1094- 5334(05)06007-3

Ochieng, A. (2006), Bank consolidations and competition: the issue of Kenya’s many small Banks. Marketing Intelligence Banking Industry Surveypp. 18-24.

Otchere, I. (2005). Do Privatized Banks in Middle- and Low-Income Countries Perform better than Rival Banks? An Intra-Industry Analysis of Bank Privatization. Journal of Banking & Finance, 29(s 8–9), 2067–2093 DOI:10.1016/j.jbankfin.2005.03.001

Resti, A. (1998). Regulation can foster mergers, can mergers foster efficiency: The Italian case. Journal of Economics and Business, 50(2), 157-169.

Shakoor, M.I. et al. (2014) Do Mergers and Acquisitions Vacillate the Banks Performance? (Evidence from Pakistan Banking Sector) Research Journal of Finance and Accounting ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) 5(6), 2014-123.

Shanmugam, B., & Nair, M. (2004). Mergers and acquisitions of banks in Malaysia. Managerial Finance, 30(4), pp. 1-18.

Sherman, A. J., & Badillo, A. (2011). M&A Prophecy: One Year Later. Wiley Periodicals, Inc https://doi.org/10.1002/jcaf.20660

Sonaje, Hemant, Vijay and Dr. Nerlekar, Shriram S., (2017), Financial Performance Analysis of Selected Banks using CAMEL Approach. IMR (Indira Management Review), Volume XI, Issue II.

State Bank of Pakistan. (2021). State Bank of Pakistan, www.sbp.org.pk/

Susmitha, M., & Mouneswari, V. (2017). Financial Performance Analysis of Syndicate Bank Using Camel. National Conference on Marketing and Sustainable Development, (pp. 677-687). Retrived 2021.

Tan, H.B & Hooy, W. (2004). Bank merger and bank stock volatility: a post-announcement análisis. Managerial Finance, 30(4) pp. 29-47. http://dx.doi.org/10.1108/03074350410769010

Tanwar, N. (2017). Performance analysis of Indian banks using camel approach. International Journal of Commerce and Management Research, 3(1), 59-67.

Urban, D.J. Y Pratt, M.D. (2000). Perceptions of banking services in the wake of bank mergers: an empirical study. Journal of Services Marketing, 14(2), pp. 118-131 Veena, K.P., & Patti, S.N., (2016). Financial Performance Analysis Of Pre And Post Merger In Banking Sector. International Journal of Management (IJM), 7(7), pp.240-249

Zafar, M. R., & Shah, D. S. (2021). Long Run Financial Performance Analysis of Pakistani Banks After Merger and Acquisition in comparison with the whole Banking Industry. KASBIT Business Journal, 13(2), pp. 70-93. Retrieved 2021, from http://kbj.kasbit.edu.pk/Vol13-2/4.pdf

Zahid, N., & Shah, A. M. (2011). Mergers and Acquisitions in International Business. European Scientific Journal, 43-56

Zaidi, N. A. (1987). Eliminating Interest from Banks in Pakistan. Karachi: Royal Book Company.
Published
2021-05-31
How to Cite
Zafar, M. R., & Shah, A. S. (2021). Dose mergers and acquisitions significantly impact the performance of banks in long run? A pre and post CAMEL study of banking in Pakistan. Amazonia Investiga, 10(40), 62-72. https://doi.org/10.34069/AI/2021.40.04.7
Section
Articles