Effect of Mergers and Acquisitions on Operational Efficiency of Commercial Banks in Kenya
DOI:
https://doi.org/10.17613/ssw7-3n19Keywords:
Mergers, Acquisitions, Operational EfficiencyAbstract
The purpose of this research was to examine the effect of M&A on operational efficiency of commercial banks in Kenya. The study adopted a descriptive research design. The study population comprised of 12 commercial banks in Kenya. The census frame comprised of four acquirer banks that have been combined for at least 5 years, that is, banks that combined between 2010 and 2015. The four banks include Kenya Commercial Bank Ltd., Equatorial Commercial Bank Ltd. (merger), Guaranty Trust Bank Ltd., and Sidian Bank Ltd. The data used in the study was quantitative as it included financial ratios and was collected using a data collection form. This secondary data was obtained from the CBK bank supervision annual reports as well as the banks' financial statements and annual reports dating back from 2005 to 2019. The paired t test revealed that there was a statistical difference in means of operating efficiency in the pre-merger and post-merger period. The independent t- test also showed a significant difference in means of operational efficiency in the pre-merger and post-merger period. The study also revealed that there was a statistical difference in the means of ROA in the pre-merger and post-merger period based on paired t-test. Additionally, independent t-test showed there was a statistical difference in the means of ROA in the pre-merger and post-merger period. Finally, merger and acquisitions, measured by EPS, did not show any statistical difference in the pre and post-merger period based on paired t –test and independent t-test. The study therefore recommends to management of commercial banks in the post-merger period to incorporate appropriate measures to improve their efficiency. For instance, the banks could transform their business models, adapt to new technology, introduce IT systems and maintain the stability of their institutions.
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