Study on Regulatory-Induced Consolidation through Mergers and Acquisitions and its Implication on Banks Performance in Nigeria

The impact of regulatory-induced consolidation through mergers and acquisitions (M&A) on bank performance in Nigeria was investigated in this research. The study covers the years 2000 to 2010 and uses eight bank performance ratios for pre-merger and post-merger periods. The paired t-test instrument of analysis was used in conjunction with descriptive statistics. The descriptive statistics revealed that after regulatory–induced M&A, banks’ financial performance deteriorated, and they became riskier in terms of profitability, liquidity, and some leverage performance ratios (such as Net worth to total asset and loan to total Deposit ratios) were used instead of capital adequacy ratios. The t-test results revealed that there is no statistically significant improvement change for the profitability, liquidity, and leverage performance ratios at the 5% level of significance. The study suggests that in the future, when considering mergers and acquisitions, policymakers and merging enterprises should have a thorough understanding of the current economic and market conditions before deciding on any strategy to push consolidation through M&A. Also, if regulatory-induced mergers and acquisitions are preferred over market-driven M&A, enough time is provided. Furthermore, all merging parties must create an acceptable memorandum of understanding that is free of personal or group gain/interest. This will, of course, strengthen the overall banking sector and enable it to perform its functions of intermediation, resource mobilisation, resource allocation, payment system facilitation, and monetary policy efficacy.

Author(S) Details

Idowu Eferakeya
Department of Accounting, Banking & Finance, Delta State University, Asaba Campus, Nigeria.

Ochuko S. Alagba
Department of Accounting, Banking & Finance, Delta State University, Asaba Campus, Nigeria.

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