The Strategic Decisions that Influenced Post Consolidation Performance of Banks in Nigeria (original) (raw)
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In any economy, the banking industry is a highly regulated industry owing to the fact that the industry is considered as the engine of economic growth and development. The objective of this research is to analyze financial performances of pre and post consolidation program in order to determine whether there is significant difference between the two periods. The study employed the use of secondary data gathered from the audited financial reports of selected banks. Descriptive analysis was employed through the use of tables and charts; then the regression is used to determine the relationships while t-test statistics is used to find out whether there is statistical difference between the means of consolidation variables and financial performance variables. It was discovered that it is not all the time that consolidation transforms into good financial performance of banks and it is not only capital that makes for good performance of banks. The study, therefore, recommends that the CBN...
POST-CONSOLIDATION EFFECT OF MERGERS AND ACQUISITIONS ON NIGERIA DEPOSIT MONEY BANK
Prior to the consolidation exercise in 2005, the banking industry was filled with a large number of weak, small banks that had low capital bases and were not performing their duties as the main financial intermediaries in the economy. The consolidation exercise which was spearheaded by the CBN governor, Charles Soludo raised the recapitalization of deposit money banks to a minimum of N25 billion naira by December 31, 2005 with mergers and acquisitions (M&As) as one of the strategies the banks could adopt to meet this requirement. By the end of the consolidation exercise, the number of banks had reduced from 89 to 25 while the capital base and reliability of the banks that survived increased. This study was carried out to find out the challenges faced by the banks during and after the exercise, the performance of these banks postconsolidation and if mergers and acquisitions has in anyway affected the banks and if so, in what ways. The panel data regression technique was used in the analysis and we found that M&As affect banks' performance but does not affect banks' cost of equity capital. We recommend that the management of Nigerian banks has to be efficient and effective in allocating available resources so as to stay relevant in the now competitive banking industry so as to enjoy the full benefits that come with mergers and acquisitions.
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MERGER AND ACQUISITION AS CONSOLIDATION TOOLS FOR CORRECTING DEFICIENCY IN BANKING SECTOR
Banks' recapitalization is based on a belief that gains can accrue through expense reduction, increased market power, reduced earnings volatility, and scale and scope economies. However, whether or not merger and acquisition scheme, widely employed by banks in Nigeria during the recapitalization exercise between 2004 and 2005, actually assist in realizing the expected gains is the basis of this research work. Thus, the hypothesis that bank merger and acquisition does not affect the banks' performance in Nigeria was tested. The Survey and content analysis method of data collection were adopted in this study. Analysis of the data, which were collected through a self-administrated questionnaire, was done using the simple percentage method, Chi-Square and goodness of fit at one per cent level of significance, while the secondary data were presented using tables and percentages. The results of the analyses showed that merger and acquisition improved banks' efficiency in Nigeria. Some of the recommendations made in this study are that: the emergence of threat posed by mega bank should be checked, priority should be given to the quality of management of banks, good credit policy should be put in place and reviewed regularly and a functional internal control system should be established in order to prevent the incidence of fraud and other anomalies in the banking system.
Post-Merger Performance of Selected Nigerian Deposit Money Banks-An Econometric Perspective
The paper examined post merger performance of Nigerian banking sector with the aim of determining the effect and the extent to which merger influenced bank performance. A judgmental sample technique was used to select 15 listed commercial banks in Nigeria. Data were collected from the published annual reports and account of these banks and were analyzed using percentage and ratios. Multiple regressions were used in testing the hypotheses. The study revealed that there is a strong relationship between bank performance and merger (strategic decisions) – asset profile, capital structure, operating efficiency, liquidity risk and credit risk. That strategic decision has positively influenced bank performance. That on average, bank consolidation resulted into improved performance. The study therefore recommended that the management of the banks should embrace diversification and financial innovation on product strategies as this will help in generating more income for the banks. They shou...
2014
This paper examines the effect of post-bank consolidation on financial leverage, asset efficiency and profitability of Nigerian banks. Cross-sectional and time series data were collected from Nigerian Stock Exchange fact books and annual reports and accounts of various banks, specifically on revenue, fixed assets, long term debt, and profit after tax. Leverage, assets efficiency and profitability ra tios were calculated and the data delineated into two eras: pre-consolidation era (involving 30 banks) and post-consolidation era (with 16 banks). Paired sample t-test of mean and multiple regression analysis were employed to evaluate bank performance. Financial leverage was lower in the post-consolidation era indicating lower ri sk, lesser vulnerability and greater stability. Assets efficiency and profitability were not significantly different in both eras. Again the multiple regression analysis shows stronger explanatory power of asset efficiency to cause changes in financial leverage for both pre-and post-consolidation eras than that of profitability, albeit in contrast to a priori expectation. The anxieties expressed by industry watchers that the dusts are not yet settled with Nigeria’s banks credibility are therefore founded in empirical results.
Impact of Banking Consolidation on the Performance of the Banking Sector in Nigeria
The Journal of Internet Banking and Commerce, 2017
Following the consolidation of the Nigerian banking sector in 2005, to among other things, develop a strong and reliable banking sector capable of supporting the development of the domestic economy, this paper examines the performance of the programme by comparing the pre- and post-consolidation performance of the sector. Two independent samples representing the 9-year period preceding the 2005 banking consolidation exercise and the corresponding 9-year post consolidation period were analyzed. Performance assessment indicators analyzed in the study are non-performing loans ratio (asset quality), return on assets (earnings/profitability), capital adequacy ratio (long-term liquidity) liquidity ratio (short-term liquidity), bank loans and advances ratio (credit delivery) and bank assets ratio (bank size). Levene's independent sample t-test was used to determine evidence of significant difference in banking sector performance between the pre- and post-consolidation periods. At 5 per...
European Journal of Business and Management, 2014
This paper investigates the effects of consolidation on banks performance in Nigeria, using the profitability as measure of performance. The study used an Ex-post-facto research in design by analyzing the CBN publications and published audited accounts of 21consolidated banks out of 25 banks that emerged after the exercise. These banks were classified into stand-alone and merged banks. The study covers a ten year-period (2002-2012). Based on the objective, a hypothesis was formulated and tested using t-test statistic. The study found that there is a significant difference in the performance of the banks that stood alone and the banks that merged. Consolidation has increased significantly the profitability of merged banks as against that of the stand-alone banks. Thus the value gains that have been alleged to accrue from consolidation have been substantiated and this implies that the CBN consolidation decision is a right step in a right direction. The study recommends among other things that for the consolidated banks to avoid going back to the "distress syndrome" era the CBN has to ensure that all loopholes are blocked to avoid abuse of funds especially from the banks chiefs. Again, these banks should be seriously checkmated against the un-professional and unethical way of sending young girls to source for deposits in forms of targets. Furthermore, the authority should make it a half-decade affair and more is to be done on adequate timing. Finally, the paper calls for an urgent implementation of the remaining reform agenda as planned by the former CBN Chief, Prof. Charles Soludo.
The Relevant Factors of Consolidation as a Multidimensional Constructs in Nigerian Banking Sector
The worsening condition of banking sector in Nigeria as a result of contagion effects of 1980 and 2008 global economic recessions, making Nigerian banks to be vulnerable, insolvent, illiquidity and distressed necessitating shareholders and investors to lose confidence in the banking operations. To arrest the situation the government embarks on consolidation as a strategic intervention to save guard the sector from total collapsing. This strategy is employed in different countries at different periods, for instance Malaysia, Turkey, Egypt and Argentina. Consolidation as a strategic intervention refers to merger, acquisition, recapitalization and nationalization, these components are well explained in literatures, what is yet to be known is the applicability of these components in explaining consolidation and this to a larger extent depend from one country to another. The study therefore wishes to investigate the factor structure of consolidation in Nigerian banking sector. Exploratory factor analysis was employed, and the study found that merger, acquisition and recapitalization with KMO= 0,73 and determinant greater than 0.00001 indicating there is no multicollinearity and singularity in the data and the components are good for factorial analysis. The four factors in descending order are Recapitalization (25.17%), Acquirer Bank Presence (14.65%), Revenue Enhancement (14.57%) and Merger (13.16%) indicating that there is more Recapitalization than other factors in consolidation.