EFFECT OF MERGERS AND ACQUISITIONS ON THE PROFITABILITY OF DEPOSITS MONEY BANKS IN NIGERIA.

Date

2016-10-13

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Department of Business Administration, Nasarawa State University, Keffi.

Abstract

For decades, mergers and acquisitions appear to provide at best a mixed performance to the broad range of stakeholders involved. While target firm shareholders generally enjoy positive short-term returns, investors in the bidding firm frequently experience share price under performance in the months following acquisition, with negligible overall wealth gains for portfolio holders. Studies provide mixed evidence and inconclusive evidence which appears counter intuitive and many fail to show a clear relationship between mergers and acquisitions and bank profitability. The main objective of this study is thus to empirically examine the effect of mergers and acquisitions on profitability of deposit money banks in Nigeria between 1999 and 2013 using ordinary least square (OLS) regression method. Annual data on share capital (SC), customer deposits (CD), Return on assets (ROA), and Return on Equity (ROE) were utilized. Findings from the study showed SC has negative and insignificant relationship with deposit money banks ROE before mergers. It showed that before mergers and acquisitions, SC had contributed negatively to the growth of deposit money banks ROE. After mergers and acquisitions, SC has positive and significant relationship with ROE. It showed that the higher the SC after mergers and acquisitions, the higher the ROE. This was in agreement with empirical literatures which showed that mergers and acquisitions of banks has significant positive effect on dividend per share of shareholders. Finally, the result further showed that CD has positive and significant relationship with deposit money banks’ ROA after mergers and acquisitions. Recommendations from the analysis are that mergers and acquisitions are necessary to ensure that banks are adequately capitalized with diversified ownership, regulatory agencies should ensure effective monitoring to minimize risk and banks should be more aggressive in financial products marketing to boost their profitability.

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Citation

A DISSERTATION SUBMITTED TO THE DEPARTMENT OF BUSINESS ADMINISTRATION, NASARAWA STATE UNIVERSITY, KEFFI. IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF MASTER OF SCIENCE (M.Sc.) IN BUSINESS ADMINISTRATION