Effect of merger and acquisition on acquirer banks in the Middle East and North Africa Region
The trends associated with merger and acquisitions in the Middle East and North Africa region have changed in the last decade and increased significantly. Most of the existing merger and acquisitions studies tend to focus on the effects of merger and acquisitions in banking in developed countries...
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| Format: | Thesis |
| Language: | English |
| Published: |
2019
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/84158/1/GSM%202019%2023%20-%20IR.pdf |
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| Summary: | The trends associated with merger and acquisitions in the Middle East and North Africa
region have changed in the last decade and increased significantly. Most of the existing
merger and acquisitions studies tend to focus on the effects of merger and acquisitions
in banking in developed countries, and limited studies have examined the effects of
merger and acquisitions in banking in developing countries such as the Middle East and
North Africa countries. In addition, there is considerable debate among many researchers
regarding the benefits afforded to economic efficiency especially through growth in both
scale and scope as a result of merger and acquisitions activities. Therefore, a
comprehensive examination of the effects of merger and acquisitions on acquirer banks
in the Middle East and North Africa region has been undertaken in this study by
investigating and analysing four main effects: the short term effect, long term effect,
efficiency effect and risk effect.
Different methods were employed to achieve the objectives of this study. The event study
method examined the short term effect, using financial ratios to investigate the long term
effect, data envelope analysis to examine the efficiency effect, and applying total risk
and market risk to measure the risk effect of merger and acquisitions on acquirer banks
in the Middle East and North Africa region.
The findings from the study found that some banks experienced positive or negative
abnormal returns during merger and acquisition announcements in the region. However,
these positive or negative abnormal returns were not statistically significant. Although,
the financial ratio results for all acquirer banks indicated that five ratios were negatively
affected, and two ratios were positively affected as a result of merger and acquisition
deals in the region. However, these positive or negative effects were not statistically
significant. All three efficiency levels (revenue, cost, and profit) in banks changed
following merger and acquisition deals. The results from conducting both the parametric
and non-parametric tests indicated the difference in profit, revenue and cost efficiency of the acquirer banks were not statistically significant. Similarly, the mean of the total
relative risk ratio and beta for all acquirer banks suggested that the total relative risk ratio
experienced a slight increase following merger and acquisition deals whereas, beta
experienced a slight decrease after merger and acquisition deals. Although similar to the
above findings, the results from the parametric and non-parametric tests indicated that
the difference in the total relative risk ratio and the beta of the acquirer banks were not
statistically significant.
Therefore, based on the overall findings and results, this study concludes that the merger
and acquisition effects (i.e., the short-term, long-term, efficiency and risk) did not play a
significant role in the acquirer banks following merger and acquisition deals in the
Middle East and North Africa region. The most prominent factor affecting the outcome
of merger and acquisition deals related to the agency problem which could explain why
some banks in developing countries remain interested in banking merger and acquisition
deals.
The empirical findings of this study are expected to contribute significantly to the
existing knowledge regarding merger and acquisitions in the banking industry in the
Middle East and North Africa region, particularly for policymakers, managers and
stakeholders of banks. Additionally, the findings and results of this study will also assist
various stakeholders in the industry such as investors, creditors, employees, bankers and
others in understanding the importance of merger and acquisitions in the Middle East
and North Africa region. |
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