Advantages And Disadvantages Of Mergers In Banks

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Banking industry plays a very important role in the economic growth of a country. Mergers and Acquisitions have become a positive way for growth in the size of banks which in turn play a significant role in entering the competitive global financial market. The Indian banking sector can be divided into two eras, the pre liberalization era and the post liberalization era. In pre liberalization era government of India nationalized 14 Banks on 19 July 1969 and later on 6 more commercial Banks were nationalized on 15 April 1980. In the year 1993 government merged The New Bank of India and The Punjab National Bank and this was the only merger between nationalized Banks, after that the numbers of nationalized Banks reduced from 20 to
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The findings of the paper suggest that bank M&A in Egypt has not shown significant improvement in performance and ROE.
Bhan Akhil (2009) in his paper gives an insight into the motives and benefits of the mergers in Indian banking industry. The study examined eight merger deals of the Indian banks during the period 1999 to 2006.
Azhagaiah & Kumar (2011), in their study tested hypothesis concerning whether there is significant improvement in the corporate performance of Indian manufacturing corporate firms following the merger event using paired t-test. The study findings indicate that Indian corporate firms involved in M&A have achieved an increase in the liquidity position, operating performance, profitability, and reduce financial and operating risk.
Azhagaiah and Sathish Kumar (2011), in their study related to short-run profitability of acquirer firms in India, selected 10 acquiring firms from chemical industry evaluated them based ratios such as Gross profit ratio, Operating profit ratio and Net profit
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Ayorinde (2012) examined the effects of merger and acquisition on the performance of selected commercial banks in Nigeria. Gross earnings, profit after tax and deposit profile was chosen as financial efficiency parameters for the purpose of study. The findings indicated an enhanced financial performance leading to improved financial efficiency.
Devarajappa S (2012) in their research explored various motives of merger in the Indian banking sector. It further compared pre and post merger financial performance of merged banks by using various financial parameters. The result suggested that post merger, the financial performance of the banks have improved, particularly, the return on equity, debt-equity ratio and Gross Profit ratio have shown significant improvement after the merger.
Saluja Rajni, Sharma Sheetal, Dr. Lal Roshan (2012) evaluated the impact of merger on the financial performance of HDFC Bank by using CAMEL Model. The study concluded that financial performance of HDFC Bank improved in post merger period in almost all parameters of CAMEL Model that is capital adequacy, asset quality, management capability, earning quality and
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