| Title : | Post-merger performance of selected Nepalese financial institutions | | Material Type: | printed text | | Authors: | Suman Dhougoda Shrestha, Author | | Publication Date: | 2016 | | Pagination: | 110p. | | Size: | GRP/Thesis | | Accompanying material: | 7/B | | Languages : | English | | Descriptors: | Consolidation and merger of corporations
| | Class number: | 658.4 | | Abstract: | Mergers and acquisitions are a global business terms used in achieving business growth and survival. Merger entails the coming together of two or more firms to become one big firm (Amedu, 2004). Soludo (2004) opined that mergers and acquisitions are aimed at achieving cost efficiency through economies of scale, to diversify and expand the range of business activities for improved performance. In today‘s world of globalized economy, mergers and acquisitions (M&A) are being increasingly used by many of the organizations worldwide to improve competitiveness of companies by gaining greater market share, broadening the portfolio to reduce business risk, to enter into new markets and geographies, and to capitalize on economies of scale etc. Merger and acquisitions is one of the distinctive strategies adopted by different companies all over the world to compete in a challenging and dynamic business environment (Abbas and Hunjra, 2014).
In the context of Nepal, in the beginning, the merger bylaws had failed to create immediate impression in the banking industry. The merger bylaws in the form of consolidation have gained acceleration after 2011 when the Himchuli Finance and Birgunj finance first sparked the merger trend and consolidated to become the H&B Development Bank. During the first quarter of the year 2016, 88 financial institutions of Nepal have merged to become 33 institutions. Within 33 institutions, 18 institutions are under the process of merger to become eight institutions that will make total of 25 financial institutions. This indicates that merger and consolidation has gradually taken place in the banking industry. This kind of activities will help to improve effectiveness of services they provide, helps in cost reduction, increase capital base and enables healthy competition.
The major purpose of this study is to investigate post-merger financial performance of the Nepalese financial institutions. The specific objectives of the study are to examine the effect of merger on RoE of Nepalese financial institutions, to assess the effect of merger on RoA of Nepalese financial institutions, to identify the difference in the financial performance of Nepalese financial institutions pre-post the merger and to find out the important factors that determine performance of merged financial institutions. The study is based on the secondary data which were gathered for a sample of 17 financial institutions of Nepal. To compare the financial performance of selected institutions the accounting and financial data of selected financial institutions is used from the period of 2007-2016 depending upon the date of merger operation. All the ratios are calculated for four consecutive years before merger and last four
ix
years after merger of bidder banks leading to the total of 68 pre and 68 post merger observations. This study employs descriptive and causal comparative research design to deal with the impact of merger on financial performance.
From the trend analysis of both ROA and ROE and the other independent variables, it has been concluded that profitability of a bidder bank decreases for the first couple of years after date of merger announcement. While comparing the impact of various independent variables on performance indicator i.e. ROA and ROE it has been concluded that credit risk is the main factor to determine profitability of the financial institutions. For both before and after merger operation credit risk has significant negative impact on both ROA and ROE. Thus decrease in credit risk will increase financial performance of merged financial institutions. |
Post-merger performance of selected Nepalese financial institutions [printed text] / Suman Dhougoda Shrestha, Author . - 2016 . - 110p. ; GRP/Thesis + 7/B. Languages : English | Descriptors: | Consolidation and merger of corporations
| | Class number: | 658.4 | | Abstract: | Mergers and acquisitions are a global business terms used in achieving business growth and survival. Merger entails the coming together of two or more firms to become one big firm (Amedu, 2004). Soludo (2004) opined that mergers and acquisitions are aimed at achieving cost efficiency through economies of scale, to diversify and expand the range of business activities for improved performance. In today‘s world of globalized economy, mergers and acquisitions (M&A) are being increasingly used by many of the organizations worldwide to improve competitiveness of companies by gaining greater market share, broadening the portfolio to reduce business risk, to enter into new markets and geographies, and to capitalize on economies of scale etc. Merger and acquisitions is one of the distinctive strategies adopted by different companies all over the world to compete in a challenging and dynamic business environment (Abbas and Hunjra, 2014).
In the context of Nepal, in the beginning, the merger bylaws had failed to create immediate impression in the banking industry. The merger bylaws in the form of consolidation have gained acceleration after 2011 when the Himchuli Finance and Birgunj finance first sparked the merger trend and consolidated to become the H&B Development Bank. During the first quarter of the year 2016, 88 financial institutions of Nepal have merged to become 33 institutions. Within 33 institutions, 18 institutions are under the process of merger to become eight institutions that will make total of 25 financial institutions. This indicates that merger and consolidation has gradually taken place in the banking industry. This kind of activities will help to improve effectiveness of services they provide, helps in cost reduction, increase capital base and enables healthy competition.
The major purpose of this study is to investigate post-merger financial performance of the Nepalese financial institutions. The specific objectives of the study are to examine the effect of merger on RoE of Nepalese financial institutions, to assess the effect of merger on RoA of Nepalese financial institutions, to identify the difference in the financial performance of Nepalese financial institutions pre-post the merger and to find out the important factors that determine performance of merged financial institutions. The study is based on the secondary data which were gathered for a sample of 17 financial institutions of Nepal. To compare the financial performance of selected institutions the accounting and financial data of selected financial institutions is used from the period of 2007-2016 depending upon the date of merger operation. All the ratios are calculated for four consecutive years before merger and last four
ix
years after merger of bidder banks leading to the total of 68 pre and 68 post merger observations. This study employs descriptive and causal comparative research design to deal with the impact of merger on financial performance.
From the trend analysis of both ROA and ROE and the other independent variables, it has been concluded that profitability of a bidder bank decreases for the first couple of years after date of merger announcement. While comparing the impact of various independent variables on performance indicator i.e. ROA and ROE it has been concluded that credit risk is the main factor to determine profitability of the financial institutions. For both before and after merger operation credit risk has significant negative impact on both ROA and ROE. Thus decrease in credit risk will increase financial performance of merged financial institutions. |
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