Mergers and acquisitions and the determinants of bank total factor productivity: empirical evidence from Malaysia

Abstract

In this paper, we employ alternate techniques to examine the impact of mergers and acquisitions on banks total factor productivity. These alternate techniques extend from use of the non-parametric, 'frontier'-oriented method of Malmquist Productivity Index (MPI) and include the more traditional regression-based approaches using central tendency estimates. Using data from the Malaysian banking sector, we find that the Malaysian banking sector has exhibited a higher total factor productivity level during the post-merger period. The empirical findings from the multivariate regression analysis suggest that income diversification and operating expenses are positively and significantly related to Malaysian banks total factor productivity, whereas credit risk exhibits negative relationship.