Bank Mergers Research Articles

Working Capital Management and Bank Mergers

This study investigates the consequences of bank mergers on non-financial borrowers’ working capital management. We find evidence that bank mergers increase corporate cash holdings and decrease receivables and investments in inventories by reducing bank credit availability. Bank mergers also decrease trade credit used through the reduction in bank credit availability. These findings are new contributions to the literature, suggesting that borrowing firms find it more difficult to manage working capital after bank mergers occur and that bank-dependent firms find it more difficult to manage working capital than their non-dependent counterparts after mergers.

Post-amalgamation Performance Review of Six Public Sector Banks in India

Consolidation of public sector banks (PSBs) is a part of reorganisation efforts with an aim to improve their profitability, solvency and efficiency. Of late merger of five subsidiaries of State Bank of India and Bharatiya Mahila Bank Ltd with it in April 2017 has kindled interest in restructuring of unprofitable banks by merging them with a profitable one. In August 2019, the Government of India announced amalgamation of 10 PSBs constituting them into four entities under Punjab National Bank, Canara Bank, Union Bank of India and Indian Bank. Earlier in April 2019, another merger had taken place following the integration of Dena Bank and Vijaya Bank with Bank of Baroda. Studies reveal that while in European countries bank mergers led to improved efficiency, in Asian countries like Indonesia recapitalisation and diversification of banks improved their profitability. In a study of Nigerian banks in Africa it is revealed that post-merger, employee morale diminishes due to stress and anxiety arising out of possible job loss and possible challenges to be met in the new environment. In the present study, the authors have tried to ascertain how profitability, solvency and efficiency of banks improved post-amalgamation in six PSBs. The outcome of the result is a mixed one, while some banks improved their profitability and solvency parameters, for others it is not so perceptible. However, efficiency indicators do not have any significant result for all six of them after amalgamation.

Determinants of Switching Intention: Empirical Evidence from Sharia Bank Mergers in Indonesia

This study examines the factors that affect customers switching intention after three state-owned Indonesian banks merge. The risk of losing customers in mergers and acquisitions (M&A) is very high because during the integration phase, management often focuses on internal issues, leaving aside important customer-related tasks. Therefore, a deeper understanding of the concept of M&A in the disciplines of marketing and consumer behavior is clearly needed for the benefit of academic knowledge and marketing practice. A total of one hundred and fifty respondents are selected using the quantitative method as sources of data collection. The questionnaires are distributed using a purposive sampling method in Surakarta, Indonesia. The software used for analysis is SEM-PLS. The results of this study state that inconvenience and religious motivation influence customer switching intentions. However, attitude and availability of suitable banks as a moderating variable did not influence customer switching intentions.

Effect of Mergers and Acquisitions in the Indian Banking Sector: A Case Study on Bank of Baroda

Effect of Mergers and Acquisitions in the Indian Banking Sector: A Case Study on Bank of Baroda

IMPACT OF BANK MERGER ON NSE NIFTY: A CASE STUDY ON MERGING OF BANKS IN 2020

Narasimham Committee in the late 1990s recommended consolidation through a process of merging of strong banks. The Committee recommended the closure of the banks those are weaker in comparison to other banks, instead of merging them. The biggest positive aspect of the merging of banks will lead to the formation of banks of scale. There are a large number of banks which are of very small in size in terms of global standards & their growth is restricted by their inability to expand. India needs more global level banks to face global competitiveness. The recent merging of the banks were aimed at addressing this problem. The announcement of merging of the banks by Finance Minister Nirmala Sitharaman on 30/08/2019, raised the expectation that it would be the most significant event that the country has witnessed since nationalization. The intention to create banks that could compete with the banks of global level & would also serve the needs of a $ 5 trillion economy by 2025. Keeping in view the above intentions, Finance Minister, Nirmala Sitharaman, declared the merging of ten public sector banks into four entities to improve their liquidity, tackling the issues of non performing assets & risk diversification. The present paper aims to explore the impact of the merging of the Banks on NSE Nifty, with respect to Stock returns, Volume of share trading & Volume of share turnover.

Mergers of public sector banks: Best partner selection using a data-driven approach

This study investigates the selection of the best partners while merging the public sector banks in India. It is set in the context of the announcement of the mega-merger of multiple Indian public sector banks on 30th August 2019. Using the clustering technique (a machine learning approach) and Data Envelopment Analysis (DEA), we identify ideal merger combinations with better efficiency. The findings highlight the possibility of identifying ideal merger combinations using objective techniques.

The Dynamics of Bank Mergers: Motives and Effects on Post Merger Productivity

The Dynamics of Bank Mergers: Motives and Effects on Post Merger Productivity

Determinants of Employee Performance: A Case of Indonesia's Islamic Bank Merger

This study aims to determine the influence of change management, organizational culture, and transformational leadership on the performance of Bank Syariah Indonesia employees. This study uses a quantitative approach with an explanatory research type. The data collection method uses questionnaire dissemination. The population used in this study was employees of Bank Syariah Indonesia, amounting to 100 people. Still, in the dissemination process, questionnaires were obtained again and then reduced to 78 questionnaires. The method to process data is SEM (Structural Equation Model), which uses AMOS software version 24.0 as a tool. Based on the results of the goodness of fit criteria analysis, after modification, indices obtained χ2: 334.059 with P≥0.05, CMIN / DF: 1.114 (≤2.00), RMSE: 0.038 (≤0.08), GFI: 0.805 (≥0.90), NFI: 0.874 (≥0.90), TLI: 0.978 (≥0.90), IFI: 0.985 (≥0.90). The goodness of fit criterion is in good condition, where after modification, indices can see a decrease in the value of chi-square offset by an increase in other criteria. This explains that modifying indices improves the goodness of fit criteria in good condition. The results of this research analysis include (1) change management has a significant influence on transformational leadership; (2) organizational culture has no influence on transformational leadership; (3) change management has a significant influence on employee performance; (4) organizational culture has a significant influence on employee performance; (5) Transformational leadership has no significant effect on employee performance; (6) transformational leadership has no mediating influence on change management and employee performance; (7) Transformational leadership has no mediating influence on organizational culture and employee performance.

Communication Process in Implementing Qanun Number 11 of 2018 concerning Sharia Financial Institutions and Mergers of Indonesian Sharia Banks

In implementing Sharia banking in Indonesia, especially in Aceh, several obstacles have emerged, such as the low level of public financial literacy, the conventional bank conversion process, supervision and regulation, changes in corporate culture, and uniformity and harmonization of Sharia banking regulations. This research aims to examine and understand the communication process in the implementation of Qanun No. 11 of 2018 concerning Sharia Financial Institutions and the merger of Bank Syariah Indonesia. This research uses a descriptive qualitative method with a case study approach. Data collection was carried out in-depth and involved various sources of information, including observations, interviews, audiovisual materials, and related documents and reports. The research results highlight the importance of effective communication in dealing with change within an organization or company. Converting a conventional bank to a Sharia bank in Aceh requires a persuasive approach and efforts to create a conducive internal climate, while the Bank Syariah Indonesia merger process shows the importance of thorough communication preparation and an effective branding strategy. Establishing a new organizational structure requires the use of methods such as chair-sharing meetings and performance-based assessments. Adopting a new corporate culture, "BSI One Culture," shows how important continuous efforts are in facilitating employee adaptation and minimizing obstacles that arise. By focusing on open, strategic, and persuasive communication, Bank Syariah Indonesia successfully completed the conversion and merger process, creating operational continuity and a new corporate culture in Aceh.

Inter-firm relationships and the special role of common banks

Using a novel dataset that combines information on customer-supplier trade relationships with information on firm-bank lending relationships, we show that common banks that lend to firms at both ends of a trade link grow and strengthen such trade relationships. To establish causality, we use bank mergers, which generate exogenous variations in the presence of common banks, and show that common bank relationships between customers and suppliers increase trade relationships by 49.6%. We find that the role of a common bank is greater when it is more informed and when supply chains suffer from larger information and holdup problems. We also document that suppliers with common banks face lower spillover risks from a distressed customer. Overall, our findings show the unique role of banks in driving inter-firm growth and investment by mitigating information and holdup problems, which arguably leads to greater economic growth.

Mergers and Acquisition of Deposit Money Banks in Nigeria: Empirical Analysis of Contribution to the Economic Growth of Nigeria (2006-2021)

Despite impressive results declared regularly by banks in Nigeria, their contribution to the economic growth of Nigeria has been a subject of mixed results as economic growth has been inconsistent for some time and historically been characterised by oscillations in both positive and negative directions. The Central Bank of Nigeria embarked on a major Mergers and Acquisition of Banks in 2005. The study evaluated the effect of Mergers and Acquisition of Deposit Money Banks’ contribution to Economic Growth of Nigeria. The study adopted ex-post facto research design. Total yearly data for Economic Growth, Total Commercial Bank Lending and Total Commercial Bank Assets were extracted from the Central Bank Statistical Bulletin for the period 2006 to 2021 and they are considered valid and reliable. The study adopted descriptive and inferential statistics and the Auto-Regressive-Distributed Lag-ARDL model was adopted for data analysis.The elasticity of Total Bank Lending- upsurges pertaining to Gross Domestic Product (GDP)- is 0.9951, indicating that ceteris paribus, a 1% rise in is expected to increase (Economic Growth ) by 0.995. The positive nexus was statistically significant at 5% (p = 0.009), showing that Total Bank Lending ( ) impact economic growth positively ( ) in the long run. Furthermore, the study revealed that the Total Bank Assets- depicted a positive nexus with GDP- . The elasticity of pertaining to is 0.5773, indicating that ceteris paribus, a 1% rise in is expected to increase Economic Growth- by 0.5773%. The positive nexus was statistically significant at 0.05 (p = 0.018), hence denoting that Total Bank Assets have a significant individual impact on Economic Growth ( ) in Nigeria in the long run. The study concluded that Total Commercial Bank Lending and Total Commercial bank Assets jointly influenced Economic Growth positively. It is recommended that the policy makers should pay attention to Mergers and Acquisition of Banks and continue to ensure that banks are strong enough to support Economic Growth.

Estimating the Synergy Value of Merger Valuation between Bank Syariah Indonesia (BSI) and Sharia Business Unit of (SBU) Bank Tabungan Negara (BTN)

The merger and acquisition of banking industry are a very important issue in Indonesia. Similar to other banking mergers, the mergers will benefit Bank Syariah Indonesia (BSI), Sharia Business Unit of Bank Tabungan Negara (BTN), and all company stakeholders. This study assessing Bank Syariah Indonesia’s current business environment, determine company’s valuation. This study analyses the environmental aspects of Bank Syariah Indonesia (BSI), both external and internal. Research methodology using quantitative and case study design. This study collects secondary data through various sources. This study computes valuation using Free Cash Flow to Firm (FCFF) and the Discounted Cash Flow (DCF) method. The result show that the synergy value of merger valuation between Bank Syariah Indonesia (BSI) and Sharia Business Unit of Bank Tabungan Negara (BTN) is Rp.98,333,621.89. By calculating the synergy value of Bank Syariah Indonesia (BSI) and Sharia Business Unit of Bank Tabungan Negara (BTN) merger, management could get additional data from preparation of merger and acquisition process.

How does competition affect retail banking? Quasi-experimental evidence from bank mergers

This paper studies bank antitrust rules which discontinuously shift bank mergers' competitive impact. The likelihood of mandatory divestiture rises sharply for mergers in markets above a threshold level of concentration, leading to an increase in the number of banks in these markets. Consistent with greater competition, intervention leads to higher deposit rates. Mortgage originations rise by 11%, from both refinancing and purchases. However, small business loan quantities do not change. The effects of intervention do not dissipate over time, and nonbank lenders respond similarly to banks. Overall, antitrust rules can increase bank competition, but relationships protect banks from competitors.

The impact of bank mergers on corporate tax aggressiveness

We study whether borrowers' opaque practices, such as tax aggressiveness, are affected by their lenders' engagement in mergers and acquisitions (M&As). Our findings suggest that borrowers' tax aggressiveness is negatively associated with bank mergers as banks increasingly rely on hard information in monitoring and lending practices following mergers. This relationship is more pronounced for borrowers that are more opaque in their information environments and have a greater need for credit, and when banks that have a greater intention to monitor borrowers and rely more on soft-information-based monitoring prior to the mergers. Our study contributes to the growing literature on whether and how bank consolidations affect borrowers' decision making.

Consolidation and Transformation: Evaluating the Impact of the Merger of KVG Bank and KGB on Rural Banking in Karnataka

Consolidation and Transformation: Evaluating the Impact of the Merger of KVG Bank and KGB on Rural Banking in Karnataka

Do Merger Announcements Enhance the Wealth of the Shareholders? Evidence from India Banking Sector

The present study attempts to examine the impact of merger announcements on shareholders’ wealth of respective banks in the Indian banking sector. The study considers 13 mergers which include the merger of both public sector and private sector banks. Event Study Methodology has been used for the analysis purpose. The study uses both a one-factor model and a two-factor model to calculate the cumulative abnormal return in various time windows. The notable findings of the study demonstrate that the market reaction towards the merger announcement is negative in both the public and private sector banks. The impact on public sector banks is more compared to the private sector banks as the resulting Cumulative Abnormal Return (CAR) values are negative and significant. Contrary to the above findings, the shareholders of Kotak Mahindra Bank and ING Vyasa Bank have gained wealth as a result of the merger as the market has reacted positively to the merger announcement.

Navigating consolidation: Understanding objectives, legislation and phases of banking mergers in the Indian financial sector: A review

Navigating consolidation: Understanding objectives, legislation and phases of banking mergers in the Indian financial sector: A review

Do Bank Mergers has Forgone or Undergone Value? From the Perspective of Investor

Purpose: The purpose of the study is to explore banking industries investors’ perceptions about merged banks synergies “economies of scale, brand scope and market power “reaction to mergers.
 Design/methodology/approach: Based on the descriptive research design, a quantitative survey was adopted and administered to 117 investors through judgmental sampling techniques. Structural Equation Modeling (SEM) was then utilized to evaluate the significance of direct and indirect relationships between the various factors under study.
 Findings: The results confirm that the bank products & services and prices affect positively similarly, brand strategy and sales channels affects positively to the perceived gain of investors after mergers.
 Research limitations/implications: The absence of a longitudinal study measuring the post merger perception of investor is the main limitation of this study. Moreover, despite being insightful, the result of this study is generalized around small geographic area only.
 Originality/value: This study is an initial attempt to fill the void in published information about the behavioral finance of bank mergers. It provides new empirical insights about the effect of post-merger performance perceived by investor’s perspective.

The merger of three state owned shariah bank in Padangsidimpuan

Abstract
 Purpose - The objective of this study is to identify the positive and negative impacts of the merger of Islamic banks on the community or customers and employees of Islamic banks in Kota Padangsidimpuan.
 Method - To address this issue, this study employed a qualitative descriptive method. Data collection for this study used the interview technique. This study involved 15 informants from the local community and 5 informants of bank employees.
 Results - The merger of Islamic banks in Kota Padangsidimpuan brought both advantages and challenges for the community and bank employees. On the bright side, the merger expanded the reach of Islamic banking services, which projected there are more people could now access essential financial products and services like savings accounts, loans, and investments. This potentially boosted financial inclusion and economic activity in the city. The merger also enhanced job security for employees, by becoming part of a larger, state-owned enterprise like Bank Syariah Indonesia (BSI), the employees gained stability and potential career advancement opportunities. However, there were also some shortcomings, the merger led to the limited access to physical banking infrastructure: The lack of new ATMs and branch offices following the merger might have inconvenienced some customers, especially those in remote areas. In addition, it adjusted the period for employees, which adapting to new systems and regulations after the merger could have been challenging for some employees, requiring additional training and support. Overall, the merger's impact was mixed. While it provided broader access to Islamic banking and job security for employees, it also highlighted the need for further expansion of physical banking infrastructure and support for employees during transitions. Addressing these challenges could help maximize the positive outcomes of the merger for the community and bank employees in Kota Padangsidimpuan.
 Limitation – The generalizability of the findings may be limited due to the study's focus on a single merged Islamic bank in one city.
 Practical Implicative - The consolidation of three Islamic banks marks a significant step in enhancing Sharia-compliant financial services. This merger has the potential to benefit both the community and the national economy. By uniting resources and expertise, the new entity offer a wider range of Sharia-approved products and services, catering to the specific needs of the community while also contributing to broader societal well-being and economic development.

Welfare analysis of bank mergers with financial instability

AbstractIn this study, we analyze the effect of a merger between banks by extending a structural model of the banking industry with the possibility of bank runs developed by Egan et al. (2017; American Economic Review, 107, 169–216). We use our framework to analyze whether the 2008 merger between Wells Fargo and Wachovia was beneficial for social welfare. The results suggest that the stability of the financial system is critical for evaluating mergers in the banking industry.