Abstract
Abstract Mergers and acquisitions (M&A) are important parts of banking reform, which can increase the synergies and reduce the costs of the banks. To analyze the effect and importance of the M&A in the reform period, we measure the productivity change of China’s banks who completed M&A during 2004– 2018, by using a two-stage data envelopment analysis (DEA) method. First, we incorporate the process of deposits producing and the process of profit earning as a two-stage structure of bank’s system. Then, we construct a slacks-based measure (SBM) model considering the weak disposability of undesirable outputs to measure the productivity of 14 M&A banks in China. Particularly, we adopt the global Malmquist index (GMI) to evaluate the productivity change of the banks, and analyze the efficiency change (EC) and technical change (TC) for the whole system and individual stages. Additionally, to facilitate making M&A plans, we classify the M&A banks to obtain the process they need to improve and the trend they could adopted: (i) We classify them into four categories by the productivity of two individual stages; (ii) We also classify them into four categories by EC and TC. Finally, the policy recommendations for M&A banks are given.
Highlights
As a vital industry in a country’s economy, the banking industry plays an important role in the process of financial development
Xie, et al.[27] decomposed the potential efficiency gains in Mergers and acquisitions (M&A) by looking commercial banks in China as two-stage production systems, Wanke, et al.[17] applied two-stage data envelopment analysis (DEA) to measure the bank efficiency and support that acquiring banks are more efficient than the target banks from the evidence of four merger cases
The reform has verified to improve the efficiency of banks and optimize the business environment
Summary
As a vital industry in a country’s economy, the banking industry plays an important role in the process of financial development. Xie, et al.[27] decomposed the potential efficiency gains in M&A by looking commercial banks in China as two-stage production systems, Wanke, et al.[17] applied two-stage DEA to measure the bank efficiency and support that acquiring banks are more efficient than the target banks from the evidence of four merger cases. These studies give no analysis on the relationship between M&A and bank performance, such as the difference between individual stages.
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