Do Mergers and Acquisitions Vacillate the Banks Performance? (Evidence from Pakistan Banking Sector)

Muhammad IrfanShakoor, Muhammad Nawaz, Muhammad ZulqarnainAsab, Waseem Ahmed Khan


Today economy of Pakistan is facing the financial, security and political problems due to which its economic growth badly disturbed. This research has been conducted to analyse either merger and acquisition increased or decreased the performance of Pakistani banks. Secondary purpose of this research paper is to provide information to bankers, government authorities, banking employees, investors and other stake holders. It also helps to the new researchers through its literature. Financial ratios such as profitability ratios (ROA,ROE...) liquidity ratios(DTA,ATD,CTA), investment ratios (ROI, EPS) and solvency ratios (DE, IC, DR) are used to analyze the impact of Mergers and acquisitions (M&A) on banks performance in Pakistan. After analyzing the merger and acquisition literature and financial ratios results it is found that not all banks which go through deal of this process (M&A) and they have not shown significant enhancement in performance and gain on equity when compared to their performance before the deals.  Additionally, it is concluded that M&A have negative relationship with banks performance in Pakistan and it is suggested to Pakistani banking corporations that they should make feasible financial analysis before going to M&A deal. This research relied much on the publically available data for a sample of Pakistani Banks listed in Karachi Stock exchange. It is difficult to collect data of mergers and acquisitions of banks before 2006 and implementation of quantitative analysis. This study results will apply in Pakistan financial sector or in those developing countries which financial environment is same as Pakistan. This study is useful for the banks, employees of banks, Proprietors, Government authorities, insurance companies and manufacturing firms. These above mentioned organizations can developed their capabilities to deal with equitably and effectively to solve the social professional problems of affecters. The value of paper easily identified through its topic, it is not only a specific study of Pakistani banking performance but it may leads toward knowledge about all developing countries banking performance. It may be the first kind of paper that offers evidences on the M&A impact on Pakistani banks profitability which uses a lot of ratios and banks have been used. This study provides useful information that keeps the great value for decision makers (management), businessmen, academics and other stakeholders.

Key words: Merger & Acquisition, financial ratios, financial institutions performance, Pakistan.

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