The effect of mergers and acquisitions on the financial performance of commercial banks in Nepal
Mergers and acquisitions (M&As) have become one of the most significant tools for consolidating banks and financial institutions (BFIs) in Nepal, which has slowed the exponential growth of banks and financial institutions since the central bank of Nepal imposed a new mandatory capital requir...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2023-10-01
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| Series: | Banks and Bank Systems |
| Subjects: | |
| Online Access: | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19032/BBS_2023_04_Adhikari.pdf |
| _version_ | 1797648123181400064 |
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| author | Baburam Adhikari Marie Kavanagh Bonnie Hampson |
| author_facet | Baburam Adhikari Marie Kavanagh Bonnie Hampson |
| author_sort | Baburam Adhikari |
| collection | DOAJ |
| description | Mergers and acquisitions (M&As) have become one of the most significant tools for consolidating banks and financial institutions (BFIs) in Nepal, which has slowed the exponential growth of banks and financial institutions since the central bank of Nepal imposed a new mandatory capital requirement. This research paper examines the consolidation and restructuring effects in Nepal’s banking sector, predominately through M&As. This study answers a key question related to the M&A effect on the financial performance of commercial banks using a set of 13 financial ratios. The study used a sample of seven commercial banks that were involved in M&A transactions between 2013 and 2020, and their significant differences in financial ratios were measured by comparing financial performance data from the three years before and after the M&A using a paired t-test statistic. The financial performance of commercial banks improved significantly after the M&A, as measured by liquidity and leverage ratios. However, the ratios of profitability and shareholder wealth show either no change or a marginal change after the M&A. This finding contributed to existing research gaps in the financial performance of the banking sector before and after the M&A in the Nepalese context and has significant policy implications for commercial banks, shareholders, government, and regulatory bodies to enforce M&A policies, review their existing M&A laws, and M&A deals between banks and financial institutions to take synergy benefits in the long term. |
| first_indexed | 2024-03-11T15:27:32Z |
| format | Article |
| id | doaj.art-d250a2e3e859480ba32811dbd43b4713 |
| institution | Directory Open Access Journal |
| issn | 1816-7403 1991-7074 |
| language | English |
| last_indexed | 2024-03-11T15:27:32Z |
| publishDate | 2023-10-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Banks and Bank Systems |
| spelling | doaj.art-d250a2e3e859480ba32811dbd43b47132023-10-27T12:18:30ZengLLC "CPC "Business Perspectives"Banks and Bank Systems1816-74031991-70742023-10-01184748410.21511/bbs.18(4).2023.0719032The effect of mergers and acquisitions on the financial performance of commercial banks in NepalBaburam Adhikari0https://orcid.org/0000-0003-3226-9971Marie Kavanagh1https://orcid.org/0000-0002-3611-243XBonnie Hampson2https://orcid.org/0000-0002-9196-4790Independent Researcher, Nepal; Ph.D., University of Southern QueenslandPh.D., Professor, School of Business, University of Southern QueenslandPh.D., Lecturer, School of Business, University of Southern QueenslandMergers and acquisitions (M&As) have become one of the most significant tools for consolidating banks and financial institutions (BFIs) in Nepal, which has slowed the exponential growth of banks and financial institutions since the central bank of Nepal imposed a new mandatory capital requirement. This research paper examines the consolidation and restructuring effects in Nepal’s banking sector, predominately through M&As. This study answers a key question related to the M&A effect on the financial performance of commercial banks using a set of 13 financial ratios. The study used a sample of seven commercial banks that were involved in M&A transactions between 2013 and 2020, and their significant differences in financial ratios were measured by comparing financial performance data from the three years before and after the M&A using a paired t-test statistic. The financial performance of commercial banks improved significantly after the M&A, as measured by liquidity and leverage ratios. However, the ratios of profitability and shareholder wealth show either no change or a marginal change after the M&A. This finding contributed to existing research gaps in the financial performance of the banking sector before and after the M&A in the Nepalese context and has significant policy implications for commercial banks, shareholders, government, and regulatory bodies to enforce M&A policies, review their existing M&A laws, and M&A deals between banks and financial institutions to take synergy benefits in the long term.https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19032/BBS_2023_04_Adhikari.pdfbanking industryfinancial performancemergers and acquisitionsNepalratio analysis |
| spellingShingle | Baburam Adhikari Marie Kavanagh Bonnie Hampson The effect of mergers and acquisitions on the financial performance of commercial banks in Nepal Banks and Bank Systems banking industry financial performance mergers and acquisitions Nepal ratio analysis |
| title | The effect of mergers and acquisitions on the financial performance of commercial banks in Nepal |
| title_full | The effect of mergers and acquisitions on the financial performance of commercial banks in Nepal |
| title_fullStr | The effect of mergers and acquisitions on the financial performance of commercial banks in Nepal |
| title_full_unstemmed | The effect of mergers and acquisitions on the financial performance of commercial banks in Nepal |
| title_short | The effect of mergers and acquisitions on the financial performance of commercial banks in Nepal |
| title_sort | effect of mergers and acquisitions on the financial performance of commercial banks in nepal |
| topic | banking industry financial performance mergers and acquisitions Nepal ratio analysis |
| url | https://www.businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/19032/BBS_2023_04_Adhikari.pdf |
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