Impact of Merger and Acquisition on Employee’s Satisfaction of Nepalese Commercial Banks

Abstract

Mergers and Acquisition have become the main means of attaining higher performance which is the ultimate goal of every firm, including banks. Merger and Acquisition is a relatively new concept to the Nepalese banking and Financial Institutions (BFIs). Bank M&As have been driven by government policy initiatives for restructuring the banking industry. In this context the commercial banks are forced to go for merging and acquisition. At the same time, it becomes important to see the impact of merger and acquisition on financial performance of banks. The objective of this study was to determine the impact of mergers and acquisition on the financial performance of commercial banks in Nepal. The research was conducted to emphasize on the financial performance of targeted banks i.e. Global IME Bank Limited and NIC Asia Bank Limited after the mergers. The study used secondary sources of data from the annual reports of selected commercial banks, annual report of Nepal Rastra Bank and other official publications over the period. Financial data from Balance sheet and comprehensive Income Statement of the respective commercial banks and NRB Supervision report for five years before and after the mergers were used to calculate the EPS, ROE and ROA. The paired sample t- test was used to analyze the financial performance. After the conduction, it was concluded that both of them showed the mixed results. The results indicated that that NIC Asia Bank’s ROE, EPS and ROA decreased after the merger as compared with before the merger while Global IME Bank’s ROE, EPS and ROA increased for the period after the merger in comparison with before the merger. An increase in ROE, EPS and ROA confirm that the bank was able to efficiently utilize the shareholders’ funds at their disposal thereby encouraging them to invest more in the bank. On the other hand, a decrease in ROE, EPS and ROA confirm that the bank was not able to efficiently utilize the shareholders’ funds. But if we talk about the overall performance in long run, we can say that both banks have slightly shown improvement in their financial performance although the results of the NIC Asia Bank Limited were lower after the merger. Keywords: Merger, Acquisition, Financial performance, Banks, ROA, EPS, ROE.