The Effect of Mergers and Acquisitions Strategies on Financial Performance of Commercial Banks in Kenya (original) (raw)
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Strategic Journal of Business & Change Management, 2023
Globalization and stiff competition propel commercial banks to embrace various survival mechanisms in order to remain relevant and post superior performance. In an attempt to alleviate the scenarios of inferior performance, commercial banks incorporated various transformative changes such as mergers and acquisition. This current study therefore investigated the effect of mergers and acquisition on organizational performance of selected commercial banks in Kenya. Synergy theory was reviewed so as to support this research project. The project embraced a descriptive research design whereas data collection was via primary means on the sample considered. The target population under consideration constituted of 195 top level managers. The study sample size comprised 131 units of analysis which were generated through the stratified random sampling techniques. This research employed primary data which was quantitative in nature and it was collected using questionnaires. Validity as well as reliability of the study tools was conducted through pilot testing before actual data collection and any adjustments made so as to warrant quality and reliable data collection process. Analysis of data was through SPSS. The test statistics results from the regression model indicated that merger and acquisition had a positive significant relationship with organizational performance. Finally, the researcher recommended that policy formulating bodies such as the central bank of Kenya should pass statutes as well as encourage commercial banks to embrace Merger and Acquisition.
Role of Mergers and Acquisitions on the Performanceof Commercial Banks in Kenya
2012
In today’s globalize economy, mergers and acquisitions (M&A) are being increasingly used world over for improving competitiveness of companies through gaining greater market share, broadening the portfolio to reduce business risk, for entering new markets and geographies, and capitalizing on economies of scale among other. The main objective of this study was to establish whether M & As have any impact on the performance of commercial banks in Kenya broken down into the following specific objectives: to determine the profitability of merged institutions pre and post merger/acquisitions; to determine whether mergers/acquisitions have impact on shareholders’ value and to determine the effect of mergers/acquisitions on management efficiency. The population of interest in this study comprised of all the 20 banks that have merged or have been acquired in Kenya. The banks considered in this study were those that either merged or were acquired during the study period of 1997 to 2010. The s...
Influence of Mergers and Acquisition on the Financial Performance of Commercial Banks in Kenya
Mergers refers to an agreement that unites firms in which one firm is formed after the event while Acquisition refers to the purchase and ownership of a controlling stake of the other firms share capital. M&A has been a source of growth option for several firms; whose main goal is to maximize the shareholders’ wealth. Numerous scholars around the globe have failed to establish through a report which is conclusive on M&As impact on financial performance of the resultant firm, by putting into consideration legislative amendments that may take effect, therefore providing the basis for this research. The goal was to evaluate the influence of Mergers, acquisitions and financial performance of commercial Banks (Kenyan-based Explanatory non-experimental design was used, purposely seeking to determine the impact of the variables that are independent on financial performance. The longitudinal survey design was used because data was collected more than one period and cross section on the basis that data was collected from different banks at a defined period. This research project was guided by the secondary collecting-data sheet and used reports of accounts audited under study as per the target population. Income statement, balance sheets and cash-flow statements were used. Descriptive results indicated that merged banks posted an increase return on equity after the merger or acquisition and this was attributed to increase in customer portfolio after the merger Regression results indicated that there were variations in performance explained increase in customer portfolio after the merger or acquisition event in the study. Correlation results showed significant positive relationship between income diversification and financial performance of merged institutions. The findings on regression results showed that merged banks had an increase in return on equity after the merger or acquisition.
Mergers and Acquisition and Financial Performance of Commercial Banks in Kenya
International Journal of Business Management, Entrepreneurship and Innovation
Commercial banks’ managers and shareholders are always adopting mergers and acquisitions aiming to improve their financial performance, economies, efficiency as well as their liquidity position. However, this doesn’t always turn out to be so since different performances has been experienced by the firms that have undergone mergers and acquisitions in the banking sector. While some studies indicate that mergers and acquisitions have adverse effect, others indicate that it doesn’t have an effect while others have documented that it positively improves performance. In the recent years commercial banks have undergone mergers and acquisitions whereby in the last 20 years a total of 10 acquisitions and 13 mergers have taken place but the performance of these banks remains mixed. Therefore, there was a need to interrogate whether commercial banks’ financial performance is affected by mergers and acquisitions given that the effect is mixed. The study’s specific objectives included establis...
Research Journal of Finance and Accounting, 2015
The purpose of the study was to assess the effect of mergers and acquisition on the performance of Commercial Bank in Kenya. The study employed a survey research design. The population of the study consisted of 36 banks that merged in the period 2000 to 2010 in Kenya with purposive sampling/ Non-probability sampling method. The study used secondary sources of data from the published audited annual reports of accounts and financial statements for the respective banks over the period from C.B.K., N.S.E., C.M.A. The study found out that; (i) ROA of the banks that merged or were acquired communicate mixed signals. ROA of the new institution improved after the acquisition or the merger. However, ROA of the new institution at times dropped slightly compared to the average of the two institutions before the coming together transaction was concluded. (ii) ROE reveals a similar trend to that revealed by ROA. ROE improved gradually from the year of merger/acquisition. (iii) EPS posted mixed r...
2016
The purpose of the study was to assess the effect of mergers and acquisition on the performance of Commercial Bank in Kenya. The study employed a survey research design. The population of the study consisted of 36 banks that merged in the period 2000 to 2010 in Kenya with purposive sampling / Non-probability sampling method. The study used secondary sources of data from the published audited annual reports of accounts and financial statements for the respective banks over the period from C.B.K., N.S.E., C.M.A. The study found out that; (i) ROA of the banks that merged or were acquired communicate mixed signals. ROA of the new institution improved after the acquisition or the merger. However, ROA of the new institution at times dropped slightly compared to the average of the two institutions before the coming together transaction was concluded. (ii) ROE reveals a similar trend to that revealed by ROA. ROE improved gradually from the year of merger/acquisition. (iii) EPS posted mixed ...
Effect of Mergers and Acquisitions on the Financial Performance of Commercial Banks in Kenya
2017
The study focuses on the effects of merger and acquisition on the financial performance of financial institutions in Kenya. The study adopts a descriptive study design using event study model to analyse the relationship existing between the accounting ratios (EPS, ROA and ROE) as measures of financial performance. The study finds that that merger and acquisition events results into either increase or decrease in the financial performance. The significance test finds that the p-value for EPS, ROA and ROE and were 0.587, 0.069 and 0.597 respectively, all greater than 0.05 signifying that the financial performance deviated significantly from the means recorded before the merger. The cumulative abnormal mean performance of EPS, ROA and ROE to 0.167, 5.274 and -1.823 respectively, hence the study concludes that merger and acquisition positively affect financial performance of commercial banks. The negative ROE is attributed to the single extreme negative performance recorded by ECB. The ...
Mergers and its Influence on the Financial Performance of Commercial Banks in Eldoret Town, Kenya
Many merged companies face various operational challenges experienced at the early years of operations, these include: Information Technology, Human Resource, Communication and financial issues. The Financial issues rely on the maximization of the shareholders’ wealth. Most merging companies face various financial challenges. The purpose of this study was to assess merger and its influence on financial performance among commercial banks in Eldoret Town. It was guided by the following objectives: to establish the effect of horizontal mergers on financial performance of commercial banks in Eldoret Town, The study adopted survey research design and it was guided by the theory of efficiency, empire building theory and agency theory. The target population for the study was all 102 employees working in 4 merged commercial banks in Eldoret town. The banks to be considered in this study were those that merged during the period of 2005 to 2017. The study adopted a census technique. Questionnaires were used to collect data. To determine the reliability of research instruments a pilot study was conducted before the actual data collection and further split half method was carried out to calculate Cronbach alpha. A value of above 0.7 confirmed the reliability of the research instruments. The data was analyzed using both inferential (multiple regression and correlation) and descriptive statistics (frequencies, percentages, mean and standard deviation) and was presented by use of tables and charts. The study findings indicated that all the study variables were significant to financial performance (Horizontal mergers β=0.160, p value=0.032,). The findings further indicated that the effect of the predictor variable Horizontal Merger explains 83.6% of the variations in financial performance of commercial banks in Eldoret town. Therefore it was concluded that merger is a predictor for financial performance of commercial banks. The study recommends that firms facing constraints on the market should consolidate their energies by resorting to merger/acquisition so as to expand their profitability as well regulators should further deploy non-market-based assessment tools that will help in assessing past performance of both companies intending to merge as a way of establishing possible reasonable for markets skepticism before and after the merger periods.
Mergers and acquisitions (M&As) represent two of a nearly limitless number of ways in which firms can combine resources to accomplish a specific objective. Pahl and Richter (2009) suggest that firms choose to combine resources for the purpose of growing their business interests. These interests include acquisition of a competitor, new ideas or products, take advantage of economies of scale through increased efficiency in organization performance and production, increased profitability through market dominance and simply for vertical integration (Kumar, 2012). Globally, mergers and acquisitions have been fuelled by increased globalisation and integration of economies. This has allowed firms to merge and acquire others across their borders so as to gain a foothold into new markets.
2015
Special thanks to my Heavenly Father for His goodness throughout this journey and for granting me all the resources, good health and the zeal to accomplish this study. My sincere gratitude to my supervisor Dr.Kennedy Okiro for the great guidance, support, constructive suggestions and inspiration throughout this research project. God bless you. For all those who contributed directly or indirectly to the accomplishment of this project, You have my sincere appreciations.