Effectiveness of Pakistani Banks after Merger and Acquisition

Abstract

The aim of merger of banks is to increase the value of banks in one way or another. The days of globalization and liberalization are in and there is a rash of merger and acquisition which is sweeping the corporate world. Consolidation in banking industry should essentially be synergy-driven to obtain a quantum leap in the effectiveness of the merged entity. It can be attained by merging complementary strength, serving a greater number of customers in a good way with more differentiated skills and products, giving a well geographical spread, comprising the cost of combined entity, better utilization of available resources, recognizing the opportunities for cross selling, deriving economies of scale and reduced competition. Over the last span, the banking industry in Pakistan has not only grown-up in terms of size but also consolidated, matured and diversified to contribute towards constructing a strong financial system. In this study, five bank merger’s cases have been taken and Null Hypothesis (there is no difference in the mean value of selected variables before and after the merger) is found rejected. Based on overall analysis, merger of My Bank Limited with Summit Bank Limited was more effective in most of the variables as compared to the merger of PICIC Commercial Bank Limited with National Investment Bank Limited, Union Bank Limited with Standard Chartered Bank Limited, JS investment Bank Limited with JS Bank Limited and Askari Leasing Limited with Askari Bank Limited.