ISSN Print: 2381-117X  ISSN Online: 2381-1188
International Journal of Business and Industrial Marketing  
Manuscript Information
 
 
Regulatory-Induced Consolidation Through Mergers and Acquisitions and Its Implication on Banks Performance in Nigeria
International Journal of Business and Industrial Marketing
Vol.1 , No. 1, Publication Date: Apr. 18, 2015, Page: 6-15
1445 Views Since April 18, 2015, 1807 Downloads Since Apr. 18, 2015
 
 
Authors
 
[1]    

Idowu Eferakeya, Department of Accounting, Banking & Finance, Delta State University, Asaba Campus.

[2]    

Ochuko S. Alagba, Department of Accounting, Banking & Finance, Delta State University, Asaba Campus.

 
Abstract
 

This paper examined regulatory-induced consolidation through mergers and acquisitions (M&A) and its implications on banks performance in Nigeria. The scope of the paper is from 2000 to 2010 using eight bank performance ratios consisting of pre-merger and post merger periods. Descriptive statistics and the paired t-test tool of analysis were employed. The descriptive statistics showed that the financial performance of the banks after the regulatory–induced M&A deteriorated and they became riskier in terms of profitability, liquidity, and some leverage performance ratios (such as Networth to total asset and loan to total Deposit ratios) employed except capital adequacy ratio. The t-test results revealed that there is no statistically significant improvement change at 5% level of significance for the profitability, liquidity and leverage performance ratios considered. The study recommends that when contemplating mergers and acquisitions in the future, policy makers and merging firms should sufficiently understand the economic and market conditions prevailing before deciding on any policy to drive consolidation through M&A. Also, sufficient time is proposed if regulatory-induced mergers and acquisitions are favoured as against creating a market- driven M&A.


Keywords
 

Regulatory-Induced Consolidation, Mergers and Acquisitions, Bank Performance, Market-Driven Consolidation


Reference
 
[01]    

Achua, J.K (2007),’A political economy of debt relief and democracies in less developed countries,’ Journal of Humanities,Vol.7,No.2:118-131

[02]    

Achua, J.K and Ola, P (2013),’ Mergers and acquisitions recapitalization strategy and banks financial volatility in Nigeria. A paper presented at the proceedings of 5th Annual American Business Research Conference held on 6-7 June at Sheraton LaGuardia East Hotel ,NY,USA.

[03]    

Adebayo, O and Olalekon, O (2012),’ An analysis of the impact of mergers and acquisitions on commercial banks performance in Nigeria, ’Pakistan Journal of Social Sciences 9(3):139-146.

[04]    

Aileman, I.O. and Oyero, K.B.L (2013),’The effect of merger on deposit money banks performance in the Nigerian banking industry,’ Journal of Applied Finance & Banking,Vol.3, No.4:105-123

[05]    

Ajayi ,M (2006),’Banking sector reforms and bank consolidation: conceptual framework, CBN Bullion,Vol.27, No.2;3-11

[06]    

Akpan, A.B (2007),’Effectiveness of banks capitalization and consolidation in building market confidence’: An assessment of customers perception in Nigeria, Journal of Business Administration,1(2) :10-19

[07]    

Allen, F and Gale, D (2003),’Competition and Financial Stability,’ Journal of money, Credit and Banking (36):453-480

[08]    

Atedo,N.A (2005),’Mergers and acquisitions: The Nigerian experience,’ Issues in Capital Development,Vol.4:27-29

[09]    

Badredira, A and Kalhoefer, C.(2009),’ The effect of mergers and acquisitions on bank performance in Egypt, German University in Cairo, Faculty of Management Technology, Working Paper Series No.18

[10]    

Bakera , M and Sava-glub, S (2002),’ Limited arbitrage in mergers and acquisitions,’ Journal of Financial Economics,Vol.64 :91-115

[11]    

Beitel, P., Schlereck, D and Wahrenbur, M (2003),’Explaining M&A success in European bank mergers and acquisitions,’ Centre for Financial Studies ,Working Paper Series, Johann Wolfgang Geoth University

[12]    

Berger, A.N, Demestz, R.S and Strahan, P.E (1999),’The consolidation of the financial services industry’: Causes, consequences and implication for the future,’ Journal of Banking & Finance,Vol.23:2-4

[13]    

Cabral, I,Dierick, F. and Vesala, J (2002),’Banking integration in the Euro Area’, European Central Bank Occassional Paper 1 (6).

[14]    

Caprion, L. (19990,’The longterm performance of horinzontal acquisitions,’ INSEAD Working Paper No.99/24/sm, April

[15]    

Carlett, E., Hartmann, P. and Spagnolo, G. (2002),’Banking mergers, competition and financial stability,’ Committee of the Global Financial System Conference2, part2.

[16]    

David, M.I. and Yener, A. (2004),’ Mergers and acquisitions and banks performance in Europe,’ The role of strategic similarities, European Central Bank Working Paper Series 398, October.

[17]    

Deb, S.G. and Mukherjee, J. (2008),’ Does stock market development cause economic growth? A time series analysis for Indian economy,’ International Research Journal of Finance and Economics, Issue 21:142-149

[18]    

Demirguc-kunt, A and Levine, R.(2000),’Bank concentration: cross county evidence. Retrieved on 26th October,2013 from http://www.global policy.org.pdf

[19]    

De-Nicolo, G. (2003),’Bank consolidation, internationalisation and conglomeration,’ trends and implications for financial risks. IMF Working Paper 03/158

[20]    

Di Georgio, R.M.(2002),’Making mergers and acquisitions work: What we know and don’t know-Part 1,’ Journal of Change Management, Vol.3 ,No.2 :134-148

[21]    

Ebimobowei, A. and Sophia, J.M.(2011),’Mergers and acquisitions in the Nigerian Banking Industry,: An explorative investigation,’ The Social Sciences, Vol.6,No3:213-220

[22]    

Enyi, P.E (2008),’Banks consolidation in Nigeria :A synergistic harvest,’ Journal of Management and Enterprise Development, retrieved on the 30th October 2013 from http://papers.ssrn.com/so12/.cfm/SSRN.ID1007783-code 486164.pdf

[23]    

Glezako, M., Mylonakis, J. and Kafouros, C.(2012),’The impact of Accounting information on stock prices: evidence from the Athens Stock Exchange,’ International Journal of Economics and Finance, Vol.4, No.2 :56-68

[24]    

Ginsburg, M.D. and Levin, J.S. (1989),’ Mergers, Acquisitions and leveraged buyouts, ’Chicago, Commerce Clearing House.

[25]    

Harford, J.(2005),’What drives merger waves, ’Journal of Financial Economics,’ Vol.77, No.3 :529-560

[26]    

Holder, C.L.(1993),’Competitive considerations in bank mergers and acquisitions,’ Economic theory, legal foundations and the Fed,’ Economic Review, January Issue:23-36

[27]    

Ikoku, A.E. (1998),’Influence-seeking and the pricing of initial public offerings and privatizations: evidence from the Nigerian equity market,’ Working Papers Series available at ssrn:http://ssrn. com/abstract-57179 or DOI:10.2139/ssrn.57179

[28]    

Jorgenson, V.B and Jorgenson, I.B (2010),’ The impact of mergers and acquisitions within the Danish banking sector during a financial crises,’ Aarhus University in Danish online, Bsc. Thesis in Business Administration and International management retrieved on 29th October, 2013 at: http://www.pure.au.dk/portal-asb-student/files/10545/ba-pdf.pdf.

[29]    

Kates, A.(1998),’Say’s Laws and the Keynnesian revolution: How macroeconomic theory lost its way,’ Edward Elgard Publishing limited.

[30]    

Kermal, M.U (2011),’Post-merger profitability: A case of Riyal Bank of Scotland (RBS),’ International Journal of Business and Social Science, Vol.2, No.5; 157-162

[31]    

Kouser, R. and Saba, I.(2011),’Effects of business combination on financial performance: evidence from Pakistan’s banking sector,’ Australian Journal of Business and Management Research, Vol.1. No. 8: 54-64.

[32]    

Kwan, S.H. and Elsenbels, R.A. (1999),’ Mergers of public traded, public organization revisited,’ Economic Review, Federal Reserve Bank of Atlanta, 4th Quarter.

[33]    

Mantravadi, P. and Reddy, A.V. (2008),’Post mergers performance of acquiring firms from different industries in India,’ International Research Journal of Finance and Economics, Vol. 22: 192-201.

[34]    

Marks, M.L.(2003),’Charging backup the Hill: Workplace recovery after mergers ,acquisitions and Down-sizing,’ SanFrancisco ,Jossey-Bass

[35]    

Mitchell, L. and Mulhern, J.H. (1996).’The impact of industry shocks on take-over and restructuring activity,’ Journal of Financial Economics,Vol.41, No.2:193-229

[36]    

Odi, N.(2013),’ Impact of pre and post bank consolidation on the growth of Nigeria economy,’ International Journal of Business and Management, Vol.8,No.13:73-82.

[37]    

Okafor, R.G.(2012),’ Performance evaluation of Nigerian commercial banks before and after consolidation,’ International Journal of Exclusive Management Research, Vol.2,No.2 ,retrieved on 25th October 2013 from http://www.exclusivemba.com/ijemr/APP_Themes/

[38]    

Theme//images/PERFORMANCE%20ANALYSIS%20OF%20NIGERIAN%20COMMERCIAL%20BANKS.pdf.

[39]    

Okpananchi, J. (2006),’ Effects of financial products marketing management on profitability of some banks in Nigeria,’ ABU Journal of Marketing Mnangement,1(11)14-21.

[40]    

Okpananchi, J. (2011),’ Comparative analysis of the impact of mergers and acquisitions on financial sufficiency of banks in Nigeria,’ Journal of Accounting and Taxation, Vol.3, No.1;1-7

[41]    

Okpara. G.C. (2011),’ Banks reforms and the performance of the Nigerian banking sector:An empirical analysis,’ International Journal of Current Research, Vol.2,No.1:142-153.

[42]    

Pazarskis, M., Alexandrakis, A. and Karagiorgos, I.(2010),’ The bpost merger accounting performance of Greek Listed firms in South-Eastern European Countries,’A paper presented at the Management of International Business and Economic Systems (MIBES)2010, International Conference held on4-6June 2010, Kavala, Greece.

[43]    

Pilloff, S.J. and Santomero, A. M (1997),’ The value effects of bank mergers and acquisitions,’ a Paper provided by Wharton School Center for Financial Institutions, University of Pennsylvania in its Series centre for financial institutions Working Papers No.97-07.

[44]    

Poposki, K. (2007),’ Merger activity in the Insurance Industry,’ Economics and Organization, Vol.4, No. 2: 161-162.

[45]    

Rhoades, S.A (1993),’ The efficiency effects of bank mergers: An overview of case studies of nine mergers,’ Journal of Banking & Finance, 22: 273-291.

[46]    

Saboo. S. and Goopi, S.(2009),’ Comparison of post merger performance of acquiring firms in India involved in domestic and cross –border acquisitions,’ MPRA Paper.No.19274.

[47]    

Sathye, M. (2002),’The impact of foreign banks on market concentration: The case of India, ’Applied Econometrics and International Development, 2 : 7-20.

[48]    

Shahbaz, M., Ahmed, N. and Ali, L. (2008),’ Stock market development and economic growth; A causality in Pakistan.’ International Research Journal of Finance and Economics, Issue 14:182-195.

[49]    

Shleifer, A. Robert, W. and Vishny, R.W (2003),’Sock market driven acquisitions,’ Journal of Financial Economics, Vol.70: 295-311.

[50]    

Soludo, C.C.(2004),’Consolidating the Nigerian banking industry to meet the developmental challenges of the 21st century, being an address delivered to the Special Meeting of the Bankers Committee, held on July6,2004 at CBN Headquartres, Abuja.

[51]    

Stiroh, K. (2002),’Diversification in banking:Is non-interest income the answer’? Staff Reports, Federal Reserve Bank of New York (154), September.

[52]    

Straub, T. (2007),’ Reasons for frequent failure in mergers and acquisitions: A comparative Analysis. Duetscher University Veriag, Wresbaden.

[53]    

Szapary, G. (2001),’ Banking sector reform in Hungary, lessons learned, current trends and prospects. In Current issues in emerging market economics organized by Croatian National Bank on 28th-30th June,2001.

[54]    

Uche, C.U (1999),’ Foreign banks, Africans and credit in colonial Nigeria. From 1890-1912.,’ Economic History Review, Vol.52 , No. 4: 669-673

[55]    

Uche, C.U (2000),’ The theory of regulation: A review article,’ Journal of Financial Regulation and Compliance, Vol.9, No.1:67-80.

[56]    

Uche, C. U and Walter C. N. (2005),’ New capitalization for banks: Implications for the Nigerian economy,’ Adamawa State University Business Journal, 1 (10),January

[57]    

Ujunwa, A and Salami, O.P.(2010),’Stock market development and economic growth :evidence from Nigeria,’ European Journal of Economics, Finance and Administrative Sciences, Issue 25:44-53

[58]    

Ullah, S. ,Farooq, S.U., Ullah, N. and Alhad, G. (2012),’ Does merger deliver value? A case of Glaxo smith Kline merger,’ European Journal of Economics, Finance and Administrative Sciences, Vol.24:13-19.

[59]    

Vanitha, S. and Selvam, M. (2007).’ Financial performance of Indian manufacturing companies during pre and post mergers,’ International Research Journal of Finance and Economics, Vol.12:7-35

[60]    

Viverita (2008), The effects of mergers on bank performance: evidence from bank consolidation policy in Indinesian. Retrieved on 30th October 2013 at http://www.wbi conpro.com/112-viverita.pdf.





 
  Join Us
 
  Join as Reviewer
 
  Join Editorial Board
 
share:
 
 
Submission
 
 
Membership