IMPACT OF MERGER & ACQUISITION ON PRODUCTIVITY GAIN IN NEPALESE BANKING INDUSTRIES

Abstract

With a focus on Siddhartha Bank Limited and Machhapuchhre Bank Limited, this study examines how mergers and acquisitions (M&A) affect productivity improvements in Nepal's banking industry. The goal is to evaluate improvements in productivity, profitability, liquidity, and operational efficiency after the merger, as prompted by Nepal Rastra Bank's 2011 merger policy. In particular, this research looks at liquidity ratios, staff productivity, and profitability measurements, adding to financial theory and real-world banking management in Nepal. The research employs a descriptive and analytical research design, relying on secondary data extracted from financial statements covering five years before and after each merger. Key financial ratios such as Return on Equity, Operating Profit Margin, and Liquidity Ratios were used to evaluate changes in performance across both banks. The sample consists of two merged entities selected through systematic random sampling from a population of twelve commercial banks involved in mergers, specifically focusing on Machhapuchhre Bank (merged in 2012) and Siddhartha Bank (merged in 2015). This sampling provided a representative view of the sector-wide impact of mergers on operational and financial metrics. Findings reveal that Siddhartha Bank demonstrated considerable improvements in profitability ratios and operational efficiency post-merger, with significant gains in Return on Capital Employed and Earnings per Share. However, Machhapuchhre Bank faced challenges in profitability post-merger, despite gains in liquidity and productivity metrics such as deposits and business per employee. This study underscores the complex nature of mergers, emphasizing that outcomes vary based on integration strategies and resource management. These insights offer valuable guidance for Nepalese bank managers and policymakers working to enhance merger success and sustain productivity in an evolving financial landscape.