IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 10 NO. 8 2024
DOI: 10.56201/ijbfr.v10.no8.2024.pg21.33

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Effect of Mergers and Acquisition on Financial Performance: Evidence from Nigeria’s Banking Sector Consolidation

Ofeimun O. Godwin, Otuya Sunday, Olarewanju M. Muhammed, Oluwafemi Onome Philo

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Abstract

Bank consolidation has been a common occurrence which is usually aimed at addressing problems of capital adequacy, liquidity, earnings, and poor management. However, in spite of a number of mergers executed, the problems of recapitalization, non-performing loans and management inefficiency still persist. To this end, this study's main goal is to investigate how mergers and acquisitions affect Nigeria's commercial banks' financial performance. Specifically, the study sought to examine whether the capital adequacy, assets quality, managerial efficiency, earnings quality, and liquidity of Nigeria's commercial banks had changed significantly after mergers. The study adopted the quantitative research design. The secondary data used in this study was taken from the annual reports of the chosen banks throughout the course of eight (8) years, 2008 to 2015 for pilot 1 and 2015 to 2022 for pilot 2 based on M&A periods. The degree to which these indicators' performances changed between the pre- and post-M&A periods was ascertained using the independent sample t-test. The study found a significant positive change in the capital adequacy, managerial efficiency, earning quality, and liquidity position of the merged commercial banks post-merger and no significant change in asset quality of the merged banks post-merger. In conclusion, the study found that mergers and acquisition has a significant positive influence on financial performance of commercial banks in Nigeria, and recommends amongst others that banks should take the post-merger earnings capacity into consideration when executing mergers.

keywords:

Mergers & Acquisition, Performance, Consolidation, Capital Adequacy, Asset

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