THE IMPACT OF M&A ON BANK’S FINANCIAL PERFORMANCE: EVIDENCE FROM EMERGING ECONOMY

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Hussain Muhammad ORCID logo, Muhammad Waqas , Stefania Migliori ORCID logo

DOI:10.22495/cocv16i3art5

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Abstract

The proliferation of bank M&A has been a global phenomenon. In many emerging economies, bank M&A has often been driven by policies for restructuring the banking industry in the hope of improving stability in the financial system. The Pakistan M&A market is relatively new and is characterized by several unique features. In this regards, our study aim is to examine the impact of pre and post M&A on the bank’s financial performance in Pakistan during the period (2004-2015). Our results reveal that liquidity, profitability and investment ratios of the banks are positively and significantly increased the performance after M&A. Nevertheless, the solvency ratios indicate negative effects which are mainly based on the fact that after undergoing M&A the acquiring bank has to deal with the greater amount of debt burden as compared to pre-M&A. In light of these results, this study suggests implications for both theory and practice and also recommends ideas for future research.

Keywords: Mergers and Acquisitions, Financial Ratios, Banking Industry, Emerging Economy

JEL Classification: G21, G30, G34

Received: 12.03.2019

Accepted: 25.04.2019

Published online: 26.04.2019

How to cite this paper: Muhammad, H., Waqas, M., & Migliori, S. (2019). The impact of M&A on bank’s financial performance: Evidence from emerging economy. Corporate Ownership & Control, 16(3), 52-63. http://doi.org/10.22495/cocv16i3art5