See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/306399652

MERGERS AND ACQUISITIONS-THE GAME OF PROFIT AND LOSS: A STUDY OF

INDIAN BANKING SECTOR

Article  in  International Journal of Arts Management · July 2016

DOI: 10.18843/rwjasc/v7i3/11

CITATIONS READS

3 497

1 author:

Ritesh Patel
Nirma University
21 PUBLICATIONS   56 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

merger and financial performnce View project

All content following this page was uploaded by Ritesh Patel on 24 August 2016.

The user has requested enhancement of the downloaded file.

 -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172

DOI : 10.18843/rwjasc/v7i3/11
DOI URL : http://dx.doi.org/10.18843/rwjasc/v7i3/11

MERGERS AND ACQUISITIONS-THE GAME OF PROFIT

AND LOSS: A STUDY OF INDIAN BANKING SECTOR

Prof. Ritesh Patel, Dr. Dharmesh Shah,

Assistant Professor Professor,
Nirma Institute of Management, N R Institute of Business Management,
Nirma University, Sarkhej-Gandhinagar GLS Campus, Off C.G. Road,
Highway, Ahmedabad, Gujarat, India Ahmedabad, Gujarat, India.

ABSTRACT

Banking is one of the important sectors of Indian economy. The purpose of this paper is to
examine the comparative position of pre & post-merger financial performance of selected banks.
Present study highlights the major gaps in financial performance compared through Economic
Value added. Using data drawn from money control and yahoo finance this present exploratory
study covers a sample of six banks, which were got, merge during 2004 to 2010. Economic value
added approach is used to compare pre and post-merger financial performance. The study revealed
that post-merger financial performance has improved in major cases. Finally, evidence is presented
that proper analysis before the merger deal can improve bank’s performance. Because of the
chosen research approach, the research results may not be generalizable for all banks. The paper
includes implications for top management of banks in designing merger deal, which can be
beneficial for them to have synergy gain in terms of financial, stock performance and wealth
maximization.

Keywords: Financial performance, Economic value added, Merger, Bank, Profitability.

JEL classification numbers: G14, G24

International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– VII, Issue – 3, July 2016 [92]
 -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172

INTRODUCTION:
The Indian banking sector is a spine of Indian economy. In the last few years, the Indian banking sector has
made brisk growth in terms of revenue due to favourable factors, but few banks were not able to perform well.
To improve performance, many banks were merged with other banks. Apart from this objective, the merger is
to improve banking services, create operational and financial synergy, market share gain, value maximization,
market expansion & creation of large identity. Among all this, the matter that needs much concern is how the
merger affects the overall financial performance of banks.
In 1980, merger and company performance was an important issue in front of management thinkers. An
empirical study (Michael Lubatkin, 1983) has made an argument that merger results in improvement of the
firm’s performance. Studies in 90’s have also examined the performance of the firm. (Healy, 1992) has studied
the performance of firms using a sample of the 50 largest mergers between U.S. public, industrial firms
completed in the period 1979 to 1983. A Study has revealed that after the merger, there was improvement in
performance in terms of assets utilization, productivity and long-term investment. (Marcia, 1991) had analysed
the post-merger financial performance of largest banks merged during 1982 to 1987& enhanced that after
merger, assets growth and employee productivity has improved. Some argue that mergers and acquisitions
activities create agency problems, resulting in less than optimal returns (Jensen, 1986) where as others argue
that M&A create synergies that result into benefit for firm (Weston et al, 2004).
This is a comprehensive review of the merger and firm’s performance. Again, there is no systematic literature
review of merger and firm’s performance which has been measured from different parameters. Given the fact that,
the merger and firm’s performance has scope for further studies. Thus, there is a need to analyses pre & post-
merger impact of merger on financial performance. Research Gap can be seen at various points in present studies
where there are scope for further study. So, to fulfil this gap, this present study will address the Comparison of pre
& post-merger financial performance using Economic Value Added (EVA). The main objective of this study is to
Analyse the comparative position of pre & post-merger financial performance of selected banks.
The remainder of this paper is organized as follows. Section 2 explains the theoretical background of different
literature on merger and firm’s performance. The methodology is presented in Section 3. Empirical evidence
and discussion on data analysis is presented in Section 4. Conclusion is presented in section 5.
Below given table 1 shows various merger happen in Indian banking industry.
Table 1: Merger & Acquisition in Indian banking Industry
Sr.No. Name of the Transferor Bank Name of the Transferee Bank Date of Merger
1 Bank of Bihar Ltd State Bank of India November 8, 1969
2 National Bank of Lahore Ltd. State Bank of India February 20, 1970
3 Miraj State Bank Ltd. Union Bank of India July 29, 1985
4 Lakshmi commercial bank Ltd Canara Bank August 24, 1985
5 Bank of Cochin Ltd State Bank of India August 26, 1985
6 Hindustan Commercial Bank Punjab National Bank December 19, 1986
7 Traders Bank Ltd. Bank of Baroda May 13, 1988
8 United Industrial Bank Ltd. Allahabad Bank October 31, 1989
9 Bank of Tamilnadu Ltd. Indian Overseas Bank February 20, 1990
10 Bank of Thanjavur Ltd. Indian Bank February 20, 1990
11 Parur Central Bank Ltd. Bank of India February 20, 1990
12 Purbanchal Bank Ltd. Central Bank of India August 29, 1990
13 New Bank of India Punjab National Bank September 4, 1993
14 Bank of karad Ltd Bank of India 1993-1994
15 Kashi Nath Seth Bank Ltd. State Bank of India January 1, 1996
16 Bari Doab Bank Ltd Oriental Bank of commerce April 8, 1997
17 Punjab Co-operative bank Ltd. Oriental Bank of commerce April 8, 1997
18 Bareilly Corporation Bank Ltd Bank of Baroda June 3, 1999

International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– VII, Issue – 3, July 2016 [93]
 -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172

Sr.No. Name of the Transferor Bank Name of the Transferee Bank Date of Merger
19 Sikkim Bank Ltd Union Bank of India December 22, 1999
20 Times Bank Ltd. HDFC Bank Ltd February 26, 2000
21 Bank of Madura Ltd. ICICI Bank Ltd. March 10, 2001
22 ICICI Ltd ICICI Bank Ltd May 3, 2002
23 Benares State Bank Ltd Bank of Baroda June 20, 2002
24 Nedungadi Bank Ltd. Punjab National Bank February 1, 2003
25 South Gujarat bank ltd. Bank of Baroda June 25, 2004
26 Global Trust Bank Ltd. Oriental Bank of commerce August 14, 2004
27 IDBI Bank Ltd. IDBI Ltd April 2, 2005
28 Bank of Punjab Ltd. Centurion Bank Ltd October 1, 2005
29 Ganesh bank of kurundwad ltd Federal Bank Ltd September 2, 2006
30 United Western Bank Ltd. IDBI Ltd. October 3, 2006
31 Bharat Overseas Bank Ltd. Indian Overseas Bank March 31, 2007
32 Sangli Bank Ltd. ICICI Bank Ltd. April 19, 2007
33 Lord Krishna Bank Ltd. Centurion bank of Punjab August 29, 2007
34 Centurion Bank of punjab Ltd. HDFC Bank Ltd. May 23, 2008
35 The Bank of Rajasthan ICICI Bank Ltd August 13, 2010
36 ING Vysya Bank Kotak Mahindra Bank Year 2015
Source: Compiled by researchers from various Banking progress report of RBI
RESEARCH QUESTION:
RQ. – Does the financial performance of all banks involved in merger gets improve after merger?
LITERATURE REVIEW:
Many researchers have analysed pre & post-merger performance of merged firm. Researchers from all over the
world has taken various industries & carried out research work on merger & firm’s performance. The detailed
literature reviews are discussed for the merger happened in Canada, Dubai, Finland, France, Germany, Greece,
Hungary, India, Ireland, Italy, Japan, Latvia, Lithuania, U.K & U.S.A. Some researchers have made an
argument that mergers and acquisitions result in negative outcome (Jensen, 1986) where as others argues that
M&A improves the firm’s performance (Weston et al, 2004). Here, this section contains the Theoretical
background on merger and firm’s financial performance.
Financial performance of firm refers to measurement that how well a firm can able to manage its assets for
generation of revenue and profit. There are various measures to study the financial performance such as income,
assets, profit and profitability ratios. Researchers have found mix outcome for merger with reference to
financial performance. Many researchers have found that after merger financial performance has improved.
(James& Ramaswamy, 2003) had examined the post-merger financial performance of firms in U.S.A.,covering
a period of 1975 to 1990 & found that there is improvement in financial performance after merger.(Kumar and
Rajib, 2007) evaluates the post-merger financial performance of various mergers happened during period of
1993 to 2004 in India which further revealed that the acquiring firms are tend to be more profitable than the
target firms. Ying et al (2007) examines the post-merger financial performance of Taiwanese baking industry
considering duration of 1997 to 2006&explores that majority of banks are operating at increasing returns to
scale, indicating that scale economies can be achieve by increasing production scale. (Sinha & Gupta, 2011)
also revealed that PAT and PBDITA have positively influenced after the merger. Further, in various research
studies (Ikpefan 2012; Barai and mohanty 2012;Kumar and Fernandez2012; Jahanzaib et al. 2013; Patel
2014),empirical evidence for the improvement in financial performance after merger has been generalised.
In contrast to these studies, many researchers have found that mergers lead to negative financial performance.
For Example,(Mogla and singh, 2011) studies the financial performance of un-group mergers and drawn an
outcome that profitability decline is quite huge and in significant manner due to decline in operational
inefficiency and poor asset utilization. (Isaac and Samuel,2013) has analysed the post-merger financial

International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– VII, Issue – 3, July 2016 [94]
 -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172

performance of five firms listed in Ghana stock exchange & found that merger has a significant negative effect
on the profitability of firms & does not able to generate value creation. Further, in a research studies (Odetayo
et al. 2013; Muhammad et al 2014), empirical evidence for the deterioration in financial performance after
merger has been generalized. Again, some researchers had found mix evidence on merger and reveal that post-
merger financial performance remain average. For example, (Halkos and Tzeremes, 2010),Obaid et al (2010),
(Kumara and satyanarayana, 2013) and (Kumar, 2014).
DATA SOURCES AND METHODOLOGY:
Sample and Data Collection:
The data used in this analysis are Banks involved in activity of or merger between 2004 to 2010. The sample
period is selected to include both growing and downtrend period of global economy. Banks are identified from
various issues of report on trend and progress issued by Reserve bank of India (RBI). Financial data was
collected from Money control, Yahoo Finance, Research Bank of India & Indian Banker’s association. The
selection of Six banks year wise are: Oriental Bank of Commerce (2004), Federal Bank (2006), IDBI (2006),
Indian Overseas Bank(2007), HDFC Bank(2008) & ICICI Bank (2010).
Here, data are taken for both pre and post-merger period. For financial performance analysis, data of financial
statements and ratios are collected for period of 10 years, i.e. 5 years before merger and 5 years after merger
from money control.
Variable used:
To carry out financial performance analysis, various variables such as total assets, interest earned, net profit, net
profit margin (%), return on long term fund (%), return on net worth (%), return on assets & earnings per share are
taken. These variable are used in previous studies by various researchers such as (James & Ramaswamy, 2003),Ying
et al (2007), Odetayo et al (2013), Muhammad et al (2014).Economic value added is also used as parameter. Many
researchers (Banerjee, 2000), (Patel and Patel, 2012) have used EVA to measure financial performance of bank.
EMPIRICAL ANALYSIS AND FINDINGS:
Financial Analysis:
Few researchers have found that merger remain beneficial for in post-merger period to improve financial
performance. For intense,(James & Ramaswamy, 2003), Ying et al (2007), (Sinha & Gupta, 2011), (Ikpefan
2012); Barai and mohanty, 2012and (Patel, 2014). According to few researchers such as (Halkos and Tzeremes,
2010), Obaid et al (2010), (Mogla and singh, 2011), (Isaac and Samuel, 2013), Odetayo et al (2013),
Muhammad et al (2014) merger is lossful for financial performance. Again there are mix evidence found by
some researchers, for intense, Knapp et al (2005), Obaid-ullah et al (2010), (Mishra and Leepsa, 2012).
Table 2: Pre & Post-merger Mean score of financial parameters
Oriental bank Federal IDBI Indian overseas ICICI
HDFC Bank
Particulars of commerce Bank Bank bank Bank
Before After Before After Before After Before After Before After Before After
merger merger merger merger merger merger merger merger merger merger merger merger
Total Assets 31,107 62,314 12617 38310 69,349 176,797 46,735 126,933 57,780 284,264 285,314 531,489
Interest
3,031 4,285 1091 3074 5,768 11,962 3,753 11,569 3,805 22,956 20,350 38,572
Earned
Net Profit 326.8 621 94 442 515.05 979.95 518.75 1,071 878.57 4,202 2,883 8,185.59
Net Profit
9.24 15.78 7.29 13.02 7.21 7.63 11.77 9.34 15.85 16.78 14.21 17.29
Margin
Return on long
140 78.13 162 69.66 88.14 135.32 156.84 133.78 67.20 70.92 66.28 72.69
term fund
Return on net
19.4 16 18.5 12.3 7.15 11.5 28.6 14.18 23 16.06 19.82 17.45
worth
Return on
91.3 200 206 246 105 130 40 131.7 138 327.9 237 250
Assets
Earnings per
91 72.7 37.4 29.2 7.81 12.3 10 17.9 28.6 50.38 32.3 55.44
Share

Table 2 shows mean score of various financial parameters in pre and post-merger period.

International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– VII, Issue – 3, July 2016 [95]
 -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172

Oriental bank of commerce has found significant increase in total assets, interest earned & net profit after
merger. Again, Net profit ratio, return on assets has increased whereas return on long-term fund & return on net
worth has decreased. EPS has reduced from 91.37 Rs. to 72.74 Rs. Overall, merger remain average. Federal
bank has witness uptrend in total assets, interest earned and net profit in post-merger period. Net Profit ratio,
return on assets shows positive trend but return on long-term fund & return on net worth shows negative trend.
EPS has decreased from 37.42 to 29.29 Rs. reveals negative outcome for shareholders. Among all IDBI has
maximum benefit from merger. Total assets, interest earned and net profit have increased. All financial ratios
show positive trend. EPS has increased from 7.81 Rs. to 12.32 Rs. In case of Indian overseas bank, after
merger, value of total assets, interest earned and net profit has increased. All ratios decreased except return on
assets. EPS has risen from 10.06 Rs. to 17.98 Rs. Overall, merger remain average for Indian overseas bank.
After merger, total assets, interest earned, net profit of HDFC Bank has grown positively. All ratios have shown
uptrend except return on net worth. EPS has risen from 28.63 Rs. to 50.38 Rs. Overall, merger remain
somewhat beneficial for HDFC Bank. ICICI Bank has witness positive growth in assets, interest income and net
profit after merger. All ratios have shown uptrend except return on net worth. EPS has shown a growth of
71.64% and increase from 32.3 Rs. to 55.44 Rs. Overall, merger remain beneficial.
Economic Value Added Analysis:
The concept of Economic Value Added was introduced by a New York based consulting firm M/s Stern Stewart
& Co in early 1980s. Indian Banking sector is now recognizing the importance of EVA. Even if corporate is
recognizing its importance. Infosys is first Indian company to report its EVA in annual report. EVA attempts to
measure true economic profit as it compares actual rate of return against the required rate of return. If NOPAT
exceeds the capital charge (WACC), EVA is positive and if NOPAT is less than capital charge, EVA is
negative.
EVA can be measured by following formula.
EVA = NOPAT - (WACC × Invested Capital) …………………………………. (1)
Alternatively, it can be calculated using this formula also
EVA  (r  c)* K  NOPAT  c * K ……………………………………………. (2)
Where,
c= Weighted average cost of capital
r = Return on invested capital
NOPAT = Net operating profit after tax
K= Invested capital

There are 3 components of EVA, namely, (1) Net Operating Profit after Tax (NOPAT) (2) WACC (3) Invested
Capital
(Stewart, 1991) defined NOPAT as the “Profits derived from company’s operations after taxes but before
financing costs and non-cash book keeping entries.
It can be calculated using this formula,
NOPAT = (Net Income - after-tax Non-Operating Gains + after-tax Non-Operating Losses + after-tax Interest
Expense) ……………………………………………… (3)
(Chandra, 2012) defines WACC as required rate of return for investors. WACC can be calculated using below
given formula,
D E
WACC  Kd  Ke ……………………………………………………. (4)
DE DE
Where,
D = Total Debt
E= Total Equity
Kd = Cost of debt
Ke = cost of Equity
Here, cost of equity is calculated using Capital Asset Pricing Model (CAPM). The CAPM was introduced by
(Jack Treynor, 1961), (William F. Sharpe, 1964), (Jack Treynor, 1965), (John Lintner, 1965) and (Jan Mossin,
1966). The expected return on equity is calculated using below given formula.
Rj  Rf  b( Rm  Rf ) ……………………….………………………………………. (5)
Where,
Rj = Expected Return on Scrip j,
International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– VII, Issue – 3, July 2016 [96]
 -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172

Rf = Risk free rate of return,

b = Beta representing the volatility of scrip j against market volatility
Rm = Expected stock market return
Cost of Debt is calculated using this formula
Cost of Debt = (Total Interest Expense / Beginning Total Borrowings) × (1−t) × 100..(6)
Invested capital represents the total investment in company. It can be calculated using below given formula.
K  D  E  M …………………………………………………………………………… (7)
Where,
K= Invested capital
D= total debt and leases
E= total equity and equity equivalents, M= non-operating cash and investments
Many researchers (Banerjee, 2000), (Patel and Patel, 2012), (Sura, 2013) have made an attempt to evaluate
performance of Bank using EVA. However, these researchers have evaluated performance of bank in relation to
EVA in normal business conditions.
EVA is calculated by considering time duration of five years before merger and five years after merger. In order
to test performance of EVA in Pre and post-merger period, a Null hypothesis is developed stated as below.
H0: Performance of EVA has improved in post-merger period
Symbolically it can be shown as,
EVAAM>EVABM

Table 3: Pre and Post-Merger Bank wise Economic Value added

Oriental Bank of Indian overseas
Federal Bank IDBI HDFC Bank ICICI Bank
commerce Bank
Particulars
Pre- Post- Pre- Post- Pre- Post- Pre- Post- Pre- Post- Pre- Post-
Merger Merger Merger Merger Merger Merger Merger Merger Merger Merger Merger Merger
Economic
value 1046 1212 1132 1857 599 3805 1276.1 4529.8 3506.91 21027.9 23599.3 15889.6
added
Net
operating
3233 3947 1196.83 2389.58 6901.36 13852.2 3817.2 11696 3977.05 23911.8 24680.8 47311.1
profit after
tax
Weighted
Average
7.30% 4.60% 8.44% 10.54% 15.85% 18.88% 5.58% 5.68% 6.02% 6.79% 1.42% 14.93%
cost of
capital
Invested
29955 59456 773.164 5054.82 39761.9 53218.2 45541 126162 7809.52 42449.1 76161.4 210457
Capital

Table 3 shows EVA in pre and post-merger situation for all banks. In case of oriental bank of commerce, Merger
does not remain much beneficial. Post-merger financial performance was not remaining much significant. The
economic value added was increased by 15.84% only in post-merger period. NOPAT was increase by 22% but
there was decreased of 37% in WACC in post-merger period. Even though that EVA was not improved
significantly as after merger the invested capital was increased by 99%, i.e. almost double. So, merger of
oriental bank of commerce with global trust bank does not remain much significant for financial performance.
Oriental bank does not able to utilize its fund for profit generation, which leads to less growth in EVA as
compare to NOPAT and Invested capital. However, the hypothesis stating that performance of EVA has
improved in post-merger period is accepted.
EVA of federal bank was improved but not significantly. After merger, EVA was increase by 65%, NOPAT by
99%, WACC by 24.88% and Invested capital by 553%. As invested capital was increase with high rate as compare
to NOPAT, EVA does not increase significantly. This happens because of improper utilization of capital which
federal bank has received after merger. Here, null hypothesis is accepted. Overall, merger remains average.
Among all the selected banks, IDBI has highest growth in EVA. After merger, EVA of IDBI was increased with
535%. Again, NOPAT, WACC & invested capital was increased with 100%,19% & 34%, respectively. It further
enhances that merger resulted in improved financial performance. Here, null hypothesis is accepted. EVA of IDBI
was increased with brisk growth in post-merger situation. Reason for this improvement in EVA was better
utilization of assets and capital in post-merger period. Overall, it concludes that merger remain positive for IDBI.
In case of Indian overseas bank, after merger EVA was improved considerably by 255%. NOPAT, WACC and

International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– VII, Issue – 3, July 2016 [97]
 -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172

Invested capital were improved with 206%, 2% and 177%, respectively. Here EVA was improved significantly
because of high growth in NOPAT as compare to Invested capital in post-merger period. This improvement was
happening because of Proper utilization of assets after merger. Again Null hypothesis is also accepted. Overall,
it enhances that merger remain beneficial for Indian overseas bank.
Merger of HDFC Bank with centurion bank of Punjab has made significant improvement of 499.62% in EVA.
As compare to pre-merger, there was an increase of 499.62% in EVA in post-merger period. NOPAT was
increased by 501% whereas WACC was increased just by 12.76%. Invested capital was increased by 443.56%
after merger. Improvement in EVA Became possible due to proper utilization of long term fund and assets. Null
hypothesis is accepted which reveals that EVA after merger has improved. Ultimately, merger is useful to
improve financial performance.
Among all selected banks, only ICICI Bank has Negative EVA after merger. EVA of ICICI Bank was decreased
by 32% after merger. This was happening because of high increase in WACC of 951% in post-merger period.
NOPAT and invested capital was increased by 91.69% & 176%, respectively. After merger, Portion of debt in
total capital and cost of debt was increased which made very high increase in WACC. Again improper
utilization of assets and fund has also reduced EVA of ICICI Bank. It further enhances that merger of ICICI
bank with Bank of Rajasthan was remain negative for financial performance. Here, Null hypothesis is rejected.
Overall, merger remain negative for ICICI Bank in terms of financial performance.

CONCLUSION:
Banks are going for merger due to various objectives such as market share gain, increase geographical
coverage, value maximization, create financial synergy and so on. But few times to fulfill this objectives,
acquirer banks do not consider few important parameters in target banks which leads to poor financial
performance. Here, financial performance analysis is performed by comparison of mean score of various
financial parameters and comparison of EVA in pre and post-merger situation. From the analysis of mean score,
it was revealed that, IDBI has maximum benefit from merger whereas only ICICI Bank has loss from merger.
For rest of the banks, merger remain somewhat beneficial. Economic value added is used as one of the financial
performance evaluation parameter. After merger, EVA of all banks has improved except ICICI Bank. ICICI
Bank does not able to utilize its assets and capital in proper manner which leads to decrease in EVA after
merger. After merger, IDBI Bank has utilized its capital and assets efficiently which leads to highest increase in
EVA. Rest of the banks, EVA has grown at low rate reflating inefficient use of resources after merger. Overall,
there are positive, negative and mix evidence on merger and financial performance, which is again supported by
(Halkos and Tzeremes, 2010), Obaid-ullahet al (2010) & Ikpefanet al (2012) in their studies.
Researchers can undertake further studies in area of merger and acquisition with respect to evaluation of
financial performance. Moreover, it can be studied that does valuation of target bank done by acquire bank has
impact on profit and return for acquire bank or not. Study has practical implications for managerial cadre. Top
management of bidder bank can have a proper analysis of past data and they can consider financial performance
rather than just considering few objectives before making merger deal. Doing such practices can make merger
more successful. As shareholders are one of the important stake holders, bank managers can decide merger
share exchange ratio which motivate the shareholders to invest more in bank securities after merger.

REFERENCES:
[1] Adebayo, O., & Olalekan, O. (2012). An analysis of the impact of mergers and acquisitions on
commercial banks performance in Nigeria. Pakistan Journal of Social Sciences, 9 (3), 139-146.
[2] Akben-Selcuk, E., & Altiok-Yilmaz, A. (2011). The impact of mergers and acquisitions on acquirer
performance: Evidence from Turkey. Business and Economics Journal, 22,1-8.
[3] Anand, M., & Jagandeep, S. (2008). Impact of merger announcements on shareholders' wealth: Evidence
from Indian private sector banks. Vikalpa: Journal for Decision Makers, 33(1), 35-54.
[4] Banerjee, A. (2000). Linkage between economic value added and market value: an analysis. Vikalpa:
Journal for Decision Makers, 25 (3), 23-36.
[5] Barai, P. & Mohanty, P. (2012). Predicting Acquisitions in India. Vikalpa: Journal for Decision Makers,
37(3), 29-49.
[6] Benson, B. W., Park, J. C., & Davidson, W. N. (2014). Equity‐Based Incentives, Risk Aversion, and
Merger‐Related Risk‐Taking Behavior. Financial Review, 49 (1),117-148

International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– VII, Issue – 3, July 2016 [98]
 -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172

[7] Carletti, E., Hartmann, P., &Spagnolo, G. (2007). Bank mergers, competition, and liquidity. Journal of
Money, Credit and Banking, 39(5),1067-1105.
[8] Chandra, P. (2012). Investment Analysis and portfolio Management, 4th ed, TMH, Delhi, India.
[9] Chen, Y. H., Kao, M. C., & Lin, C. Y. (2011). Do efficiency improvements from mergers and
acquisitions occur in Taiwanese banking industry? An application of data envelopment analysis.
International Research Journal of Finance and Economics, 73, 150-159.
[10] Cornett, M. M., & De, S. (1991). Common stock returns in corporate takeover bids: Evidence from
interstate bank mergers. Journal of Banking & Finance, 15 (2), 273-295.
[11] Drymbetas, E., & Kyriazopoulos, G. (2014). Short-term Stock Price Behaviour around European Cross-
border Bank M&As. Journal of Applied Finance and Banking, 4 (3),47 -70.
[12] Halkos, G., & Tzeremes, N. (2010). Measuring the effect of virtual mergers on banks’ efficiency levels:
A non-parametric analysis. available at: https://mpra.ub.uni-muenchen.de/23696/ (Access as on 15
October 2015).
[13] Healy, P. M., Palepu, K. G., & Ruback, R. S. (1992). Does corporate performance improve after mergers?
Journal of financial economics, 31(2), 135-175.
[14] Ikpefan, O. A. (2012). Post-Consolidation Effect of Mergers and Acquisitions on Nigeria Deposit Money
Bank. European Journal of Business and Management, Vol. 4 (16), 151-162.
[15] Irfan Shakoor, M., Nawaz, M., Zulqarnain Asab, M., & Khan, W. A. (2014). Do Mergers and
Acquisitions Vacillate the Banks Performance? (Evidence from Pakistan Banking Sector). Research
Journal of Finance and Accounting, 5 (6), 123-137.
[16] Jensen, M. C. (1986). Agency cost of free cash flow, corporate finance, and takeovers corporate finance
and Takeovers. American Economic Review, 76 (2), 323-329.
[17] Knapp, M., Gart, A., & Becher, D. (2005). Post‐Merger Performance of Bank Holding Companies 1987–
1998. Financial Review, 40(4),549-574.
[18] Kumar, B. R., & Fernandez, M. (2011). Emirates Bank International (EBI) merger with National Bank of
Dubai (NBD)-A Valuation Perspective. International Journal of Business Insights & Transformation,
5(1), 4-12.
[19] Kumar, B. R., & Rajib, P. (2007). Characteristics of merging firms in India: An empirical examination.
Vikalpa: Journal for Decision Makers, 32(1), 27- 44.
[20] Kumar, S. (2013). Impact of Bank Mergers on the Efficiency of Banks: A study of merger of Bharat
Overseas Bank with Indian Overseas Bank. International Journal of Academic Research in Business and
Social Sciences, 3 (12), 221 – 242.
[21] Kumar, S. (2013). Post-merger efficiency of banks in India-A study of HDFC bank and Centurian bank of
Punjab. Zenith International Journal of Business Economics & Management Research, 3(11), 50-61.
[22] Leepsa, N. M., & Mishra, C. S. (2012). Post-merger financial performance: a study with reference to select
manufacturing companies in India. International Research Journal of Finance and Economics, 83 ,6-17.
[23] Lintner, J. (1965). The valuation of risk assets and the selection of risky investments in stock portfolios
and capital budgets. The review of economics and statistics,47 (1), 13-37.
[24] Lubatkin, M. (1983). Mergers and the Performance of the Acquiring Firm. Academy of Management
review, 8 (2), 218-225
[25] Moeller, S. B., Schlingemann, F. P., & Stulz, R. M. (2005). Wealth destruction on a massive scale? A
study of acquiring‐firm returns in the recent merger wave. The Journal of Finance, 60 (2),757-782
[26] Mogla, M., & Singh, F. (2011). Performance Comparison of Group vis-à-vis Non-Group Mergers.
Vision: The Journal of Business Perspective, 15 (1), 11-19.
[27] Mossin, J. (1966). Equilibrium in a capital asset market. Econometrica: Journal of the econometric
society, 34,(4), 768-783.
[28] Nangia, V. K., Agarawal, R., & Reddy, K. S. (2011). An empirical test on share price behavior of target
firms in reference to announcement of open market acquisitions. ELK asia pacific journal of finance and
risk management, 2 (1), 1- 35.
[29] Neely, W. P. (1987). Banking acquisitions: Acquirer and target shareholder returns. Financial
Management, 66-74.
[30] Obaid-ullah, S. U., & Usman, A. (2010). Post-merger performance of Atlas investment and AL-Faysal
Investment bank. International Research Journal of Finance and Economics, 60, 168-174.
[31] Odetayo, T. A., Sajuyigbe, A. S., & Olowe, S. O. (2013). Empirical Analysis of the Impact of Post-
Merger on Nigerian Banks Profitability. Research Journal of Finance and Accounting, 4 (17), 91-97.

International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– VII, Issue – 3, July 2016 [99]
 -Journal of Arts, Science & Commerce ■ E-ISSN 2229-4686 ■ ISSN 2231-4172

[32] Oduro, I. M., & Agyei, S. K. (2013). Mergers & Acquisition and Firm Performance: Evidence from the
Ghana Stock Exchange. Research Journal of Finance and Accounting, 4(7), 99-107.
[33] Olusola, O. A., & Olusola, O. J. (2012). Effect of mergers and acquisition on returns to shareholders of
conglomerates in Nigeria. Research Journal of Finance and Accounting, 3 (7), 86-90.
[34] Patel, R. (2014). Pre-Merger and Post-Merger Financial & Stock Return Analysis: A Study with reference
to selected Indian Banks. Asian Journal of Research in Banking and Finance, 4(12), 1-9.
[35] Patel, R. J., & Patel, M. (2012). Impact of Economic value added (EVA) on Share price: A study of
Indian Private Sector banks. International Journal of Contemporary Business Studies, 3(1), 24-34.
[36] Ritesh Patel & Mitesh Patel (2015). Does Merger Be Prolific? A Study of Selected Indian Banks.
International Journal of Applied Financial Management Perspectives, 4 (3), 1965-1970.
[37] Patel, R., & Shah, D. (2016). Mergers and Acquisitions: A Pre-post Risk-Return Analysis for the Indian
Banking Sector. Journal of Applied Finance and Banking, 6(3), 99-112.
[38] Patel, R., & Shah, D. (2016). Merger and acquisition: A game of Loss and Profit, 38 (1)130-136.
[39] Qian, J., & Zhu, J. L. (2014). Return to Invested Capital and the Performance of Mergers and
Acquisitions. Available at SSRN 2458816. (Access as on 15 October 2015).
[40] Rafique, D., & Muhammad, U. (2013). Impact of Merger and Acquisitions on Stock Returns: A Case of
Financial Sector Firms of Pakistan. Available at SSRN 2305936 (Access as on 15 October 2015).
[41] Ramaswamy, K. P., &Waegelein, J. F. (2003). Firm financial performance following mergers. Review of
Quantitative Finance and Accounting, 20 (2), 115-126.
[42] Rani, N., Yadav, S. S., & Jain, P. K. (2011). Impact of mergers and acquisitions on shareholders’ wealth
in short-run: an empirical study of Indian pharmaceutical industry. International Journal of Global
Business and Competitiveness, 6 (1), 40-52.
[43] Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The
journal of finance, 19 (3), 425-442.
[44] Shobhana, V. K., & Deepa, N. (2012). Impact of Mergers and Acquisitions on the Shareholder Wealth of
the Select Acquirer Banks in India: An Event Study Approach. IUP Journal of Bank Management, 11(2),
26 - 31.
[45] Sinha, P., & Gupta, S. (2011). Mergers and Acquisitions: A pre-post analysis for the Indian financial
services sector. Available at https://mpra.ub.uni-muenchen.de/31253/ (Access as on 18 October 2015).
[46] Stewart, G. B. (1994, Summer). EVA: Fact and Fantasy. Journal of Applied Corporate Finance, 7(2), 71-84.
[47] Sultan, J., Ali, A., & Saeed, A. (2013). A Comparison of Technical Efficiency of Performance of
Different Banks Before and After Merger: A Study of Pakistan Banking Industry. Journal of Economics
and Sustainable Development, 4 (9) , 113-126.
[48] Sura, J. S., & Lather, M. A.(2013). Indian Banking and Information Content of EVA and Traditional
Measures. IOSR Journal of Economics and Finance, 1 (1), 48-61
[49] Tebourbi, I. (2012). Timing of Mergers and Acquisitions: Evidence from the Canadian Stock Market.
International Journal of Economics and Finance, 4 (9), 87- 106
[50] Treynor, J. L. (1961). Toward a theory of market value of risky assets. Journal of Investment
Management, 1,(2), 6072 -6091.
[51] Treynor, Jack (1965). How to Rate Management of Investment Funds. Harvard Business Review, 43, 63-75.
[52] Ulla, O., Ulla, S., & Usman, A. (2010). Post-merger Performance of Atlas Investment and Al-Fayal
Investment Bank in Pakistan. International Research Journal of Finance and Economics, 60, 168-174.
[53] Venkatesan, S., &Govind Raj, K. (2011). Acquisition activities of Public sector banks in India and its
impact on shareholders wealth. International Research Journal of Finance and Economics, 67, 63-71.
[54] Wangerin, D. (2012). The consequences of M&A due diligence for post-acquisition performance and
financial reporting”, Available at SSRN 2118836. (Access as on 19 October 2015).
[55] Weston, J.F., Mitchell, M.L., and Mulherin, J.H. (2004). Takeovers, restructuring, and corporate
governance, 4th ed., Upper Saddle River, NJ: Pearson Prentice Hall
[56] Wong, A., & Cheung, K. Y. (2009). The effects of merger and acquisition announcements on the security prices
of bidding firms and target firms in Asia. International Journal of Economics and Finance, 1(2), 274-283.
[57] Zvi Bodie, A. K. (2012). Investments. 8th Ed., TMH, Delhi.

----

International Refereed Research Journal ■ www.researchersworld.com ■ Vol.– VII, Issue – 3, July 2016 [100]

View publication stats