Research Proposal

Indian Banking Mergers Evaluation

Contents
Page No Aim: Introduction 3 3

Research Objective: Research Question: Literature Review: Research methodology: Data Collection: References

4 4 5 7 8 10

Aim:
The main aim of the thesis is to endow with an analysis of enduring merger trend in Indian banking from the outlook point of stockholders and managers. Primarily, the author will judge the drift in combination in international and Indian banking. Then to determine the investors Perceptions, the writer will organize an event study assessment of bank store returns that will disclose that in case of compulsory combiners, neither the bidder nor the aim banks investors have advantages (Strahan PE 1999). But in case of voluntary merger, it will be seen that the offered banks investors have attained more than the bidder banks. Despite the non attendance of any profit to the target banks a venture of bank administrators strongly support combiners and recognize the vital topics in a fruitful combiner as the estimation of loan collection, combining of IT stages, and topics of human assets administration. Lastly, the favor of the author will be the concept of the requirement for major banks by conflicting that pending confronts to banks such as those posed by full adaptable, Base- II circumstances, economical addition, and requirements for major capitalization banks are the initiatory forces for driving further mergers in the banking section in India and other Asian finances.

Introduction
Now a days the international mergers and acquisitions are getting more and more effectual for restructuring the corporate sectors as well as the other finance industry. Due to increasing level of competition the margin of merger activity is gradually on the increase. It is heavily depended on some features like economies of scale, cost competence, and productivity. Financial crisis is also putting pressure on the

organization to go for it. Numerous academic studies as example Berger et.al (1999) for an excellent literature review suggest that associated increase in banking and these studies have assumed one of the two competing approaches. A merger is probable to produce better presentation if the alteration in accounting-based alterations in the performance of similar banks that were not including in merger activity is essential. Merger is implicit to generate assessment of the shared value of the bidder and target banks.

The awareness of bank managers will be determined throughout a questionnaire based study that fetch out quite a few serious subject on bank mergers with approaches and guidelines for the future. So the author wills suggests why Indian banks should go for mergers. This point of view is also quite appropriate to other Asian countries which have bank consolidation on their schedule. The author will also present opinion on behalf of big banks in addition to necessitate for banking consolidation in India and in other several countries of Asia also. The author will analyze a number of serious issues in mergers based on the view of banks by assessment of the results from a questionnaire based survey.

Research Objective:
Panoramic analysis of merger trend in India Ascertaining Managers and investors perception in merger Confer the issues related to Indian banking in merger

Incident analysis of bank store return

Research Question:
For the research work the following question is addressed by the author in the proposal: i. What is the impact of merger in strengthening the Indian & International Banking Sector? ii. iii. iv. v. How to strengthen the Banking sectors in India? What perception does investors holds while they hear about Merger? What role does internal analysis of the organization plays in the merge decision? Why there are consolidation purposes for the banks of Indian and other Asian countries?

Literature Review:
The two significant subject assessed by numerous educational learning connected to bank mergers are: primarily, the influence of mergers on working presentation and competence of banks and subsequent, study of the influence of mergers on promote worth of justice of both bidder and objective banks. Berger ettal (1999) offer an outstanding text appraisal on both these topics. Hence, it leads to restrict the discussion to rewinds some of the important studies. The primary topic recognized is the education of post combiners as per proceeds, working fixed cost, and competence ratios related to the premerger presentation of the banks. Here the combination is understood to progress presentation in terms of productivity by dropping prices or by rising revenues. Cornett and Tehranian (1992) and Spindit and Tarhan (1992) offered proof for augmented in post merger working presentation. But the lessons of the Berger and Humphrey (1992), Pilloff (1996) and Berger (1997) do not locate any proof in post-merger working presentation. Berger and Humphrey (1994) noticed that maximum educations checked premerger and post merger economic and understanding of advantages of mergers, choosing of examples and the processes accepted in investing the mergers. Front line X-competence processes to decide the X-competence advantages of backmergers. Most of the US based educations determined that there is substantial impending for price competence advantage from bank mergers since (there is considerable X incompetence in the business), but the information demonstrates that on a standard, such reimbursement were not understood by the US mergers of 1980s (Berger and Humphrey, 1994). The next topic recognized is the assessment of merger profits in terms of cost working of the bidders and target banks on declaration of merger. A merger is desired to produce ethics if the integrated worth of the bidder and target banks enhances on the declaration of the mergers. Pill of and Santomero (1997) organized a venture of the experiential proof and said that maximum education, did not qualify to recognize assertive dealings between merger action and profits in either presentation or stockholder riches. Again the purposes for, combined proof are numerous. A merger statement also

integrates data on investing of the merger if the merger is invested by impartiality contribution it may be understood as over assessment of the person conducting the topic. Hence, the unenthusiastic declaration returns to bidding organization could be partially trait able to off-putting indicating irrelevant to the worth produced by the merger (Houstone, ettal, 2001). Takings to bidder organization shareholders are considerably better in bank mergers invested with money than in mergers invested with store (Houston and Ryngaert, 1997). Indian Experience: Development of functional and sharing proficiency of profitable banks is a permanent topic for conversation in the Indian norms milieu and Government of India in discussion with Reserve Bank of India (RBI) have, after many time, recruited numeral councils to propose framework modifications towards this aim. Some vital councils among these are the Banking Commissions, 1972 (Chairman: R.G. Saraiya) and 1976 (Chairman: Manubhai Shah), and the council for the operating of Public Sector Banks, 1978 (Chairman: James S. Raj.). Restructuring of Weak Banks: The Government of India has accepted the way of mergers among others with a conception to re engineer the banking process. Many minor and feeble banks have been combined with the other banks chiefly to secure the curiosities of savers. These are categorized as enforced combiners. When a definite bank explores severe indications of illness such as large NPAs, corrosion in web estimation or considerable reduction in assets sufficiency ratio, RBI inflicts suspension under Section 45(1). Banking Regulation Act is passed in 1949 for a definite time on the performance of the minor banks. In this suspension time RBI recognizes a major bank and questions that bank to design a strategy of combiners. In the combiner strategy, generally the obtaining bank captures all the resources and legal responsibilities of the minor bank and assures remuneration to all the savers in case they desire to remove their maintenance.

Mergers: Shareholders Perception: As said previously, Indian banking section has seen two types of combiners, forced and charitable combiners. If discussed about the first type, the forced combiner started by the RBI, the major focus is to secure the curiosities of the minor bank. When a bank has addressed indications of illness like the NPAs, and the considerable corrosion of web value, RBI has interfered and combined the minor bank with the major one. So, the theory is that if the forced combiners aim the bank investors would obtain irregular revisits on declarations of the combiners.

Research methodology:
The research process that the author will follow in researching for this article has been scrutinized in this segment. The author have given and illustrated on every diverse types of research techniques that were provided in hypothetical and realistic terms. The author at time tinted this definite representation that proved most sufficient and suitable to the article of this thesis. These declarations have been authenticated by Cooper and Sohindler (1998) and also by Zikmeend (2000), in their articles where they concur with the situation that these diverse kinds of research process survive in the premise of educational and commerce research. Research Process: As per to Saunder et al (2003), there are two diverse types of research advance. One can utilize a single process between this derived approach and introduced approach. Derived approach: This is a type of approach where after listening a textual hypothetic and theory are established i.e., testing theory. Introduced Approach: This is the type of process where after gathering the knowledge, it is assessed and after that the texts are established i.e. establishing hypothetic.

In my hypothetic I will utilize the two diverse approaches. The research preparation was established from the hypothetic that will utilize to respond my research queries. Sample Size: Though Walker (1985) recommended that 20- 40 in-depth meeting are needed for standard research, due to the restricted time span for the current education and the price engaged, the research will organize meeting from 20 managers from different organization. The form of the example for the standard education was concluded when dissemination was attained for hypothetic and knowledge, and if any recent topic put in.

Data Collection:
Primary Data: The requirement to collect the knowledge and also to collect the thoughtful imminent into the issue of Merger in Indian Banks, the researcher thought interview through email questionnaire to be the most appropriate means (Denscombe, 2000, p. 132). The process is selected for the current education purpose being authorized direct relation with the respondents (Bryman and Bell, 2007); to attain recent imminent, produce richest knowledge, notice the issue in depth, suppleness to the interviewer in management with guide to the interview process like choosing conceptions, strive the faults, not constant due to suppleness, knowledge gathered could be too major to structure the subject, record would not be problematic (Yin 2003; Crescwell 2007; Newmann 2003). To gather knowledge from the interviewers the author will offer to utilize the manuals as the fact that the queries were anticipated to vary due to the performance that the crates had very diverse plans. As per Hussey & Husey (1995) questions let the best usage to the understanding that the members are considering the steps and the incidents, which have or are happening and the concepts and encouragement of themselves and the members. In standard process there is a benefit as it lets the explorer to estimate the organized administrator of the organizations who are measly accountable for the improvement of the organization.

Interview was noticed by allowing wide reminder also spontaneously tracked. Tentative Questions: 1. What is your central organization? Can you provide details about it? Secondary Data Collection: This knowledge will be gathered from diverse websites, yearly accounts, books, and periodicals, and the case learning from the papers, journals, and websites. The target of the knowledge gathering is to explore the relevant knowledge considered. So the knowledge attained is an integral part of the thesis issue. Pilot Study: A pilot study will be organized among the people conducting the interview to assure the terms utilized are correct and perfect. Interview will be organized as individuals utilizing email questionnaire process, this will assist the person conducting the interview to ask many questions which were not listed in the interview manual reliable on the persons feedback. (Thornhill, 2000, p.135) Data Analysis: The knowledge will be assessed utilizing internal assessment after sampling. After the meeting is complete, information will be decreased so to recognize the model and subjects so to obtain imminent. Information need to be coded, assessed and contrasted and classified on the research queries (Gharry and Gronhaug, pp. 2005). If after this more information is needed or new queries are there, the process of other information gathering will be done.

References
Berger AN and Humphrey D(1994) Bank Scale Economics, Mergers, Concentration, and Efficiency: The U. S. Experience, Center for Financial institutions Working Papers 94 25, Wharton School Center for Financial Institutions, University of Pennsylvania. Berger AN, Demetz RS, Strahan PE (1999) The Consolidation of the Financial Services Industry: Causes, Consequences and Implications for the Future, Journal of Banking and Finance, 23: 135-194. Berger, AN and Humphrey D. (1992) Mega Mergers in Banking and the Use of Cost Efficiency as an Anti Trust Defense The Anti Trust Bulletin, 37: 541-600. Berger, AN. (1997) The Efficiency Effects of Bank Mergers and Acquisitions: A Preliminary Look at the 1990s data. In Arnihud Y, Miller G (Eds), Mergers of Financial Institutions. Business One-Irwin, Homewood, IL. Cooper, D. R. & Schindler, P.S. 2001, Business Research Methods, Seventh edition, McGraw Hill, Singapore. Cornett MM Teharnian H. (1992) Changes in Corporate Performance Associated with Bank Acquisitions, Journal of Financial Economics, 31: 211-234 Denscombe A. (2000) Damodaran on Valuation: Security Analysis for Investment and Corporate Finance, New York: John Wiley and Sons Devine, Marion (2003) Successful Mergers: Getting the People Issues Right, London: The Economist. Dymski, G. A. (1999) The Bank Merger Wave: The Economic Causes and Social Consequences of Financial Consolidation .Armonk, NY: M.E. Sharpe. Dymski, G. A. (2005) Financial Globalization, Social Exclusion and Financial Crisis, International Review of Applied Economics, 19(4): 439-457.

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Ghauri, P. and Gronhaug, K. (2005) Research Methods in Business Studies: A practical Guide. (3rd edn.), Pearson Education Limited Gelos R. G. and Roldos J. (2004) Consolidation and Market Structure in Emerging Market Banking Systems, Emerging Markets Review, 5(1), 39 59. Gual J. (1999) Deregulation, Integration and Market Structure in European Banking, CEPR, Discussion Paper No. 2288, (CEPR, London). Hannan, T and Wolken, J (1989) Returns to Bidders and Targets in Acquisition Process: Evidence from the Banking Industry, Journal of Financial Services Research, 8: 145156. Havrylchyk, O. (2004) Consolidation of the Polish Banking Sector: Consequences for the Banking Institutions and the Public, Economic Systems 28(2): 125 140. Hawawani G, Swary I. (1990) Merger and Acquisitions in the US Banking Industry, Evidence from the Capital Markets, Amsterdam: North-Holland.32 Houston J F and Ryngaert M.D.(1997) Equity Issuance and Adverse Selection: A directed Test using Condition Stock Offers, The Journal of Finance, 52(1): 197-219. Hussey, j. and Hussey, R. (1997) Business Research: A practical Guide for undergraduate and post graduate studies. Basingstoke: Macmillan Press Ltd. Kishan R.P. and Opiela TP.(2000) Bank Size, Bank Capital, and the Bank Lending Channel, Journal of Money, Credit and Banking, 32(1): 121 41. Strahan, E. S. (2000) The potential diversification and failure reduction benefits of bank expansion into non-banking activities, Working Papers in Applied Economic Theory 2000-01, Federal Reserve Bank of San Francisco. Mackinlay Craig A. (1997) Event Studies in Economics and Finance, Journal of Economic Literature, 35 (1): 13-39.

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Mohan, Rakesh. (2005) Reforms, Productivity, and Efficiency in Banking: The Indian Experience, Speech Delivered at 21st Annual General Meeting and Conference of Pakistan Society of Development Economists, Islamabad. Narasimham, M. (1998) Report of the Committee on Banking Sector Reforms,

Government of India. Pilloff Steven J. (1996) Performance Changes and Shareholder Wealth Creation Assocaited with Mergers of Publicly Traded Banking Institutions, Journal of Money Credit and Banking, 28(2), 294-310. Pilloff, S.J. and A.M. Santomero. (1997) The Value Effect of Bank Mergers and Acquisitions, Working Paper, No. 97 (7), The Wharton Financial Institutions Centre, October. Reddy, Y.V. (2005) Monetary Co-operation in Asia, Speech by Governor, Reserve Bank of India at the IMF MAS High-Level Seminar on Asian Integration held on September 3, 2005 at Singapore. Saunder, M Lewis, P and Thornhill, A (2003) Research Methods for Business Student (3rd Ed.) England Prentice Hall. Walker (1991), "Thinking About Brand Equity and the Analysis of Customer Transactions," in Managing Brand Equity: A Conference Summary, Report No. 91-110, Eliot Maltz, ed., Cambridge, MA: Marketing Science Institute, 17-18. Yin, R.K. (1994), Case study research: design and methods, sage publications, Thousands Oak, 2nd edition Zikmund, W. G. 1997, Business Research Methods, Forth edition, Dryden Press,New York.

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