IMPACT OF MERGER AND ACQUISITION ON FINANCIAL PERFORMANCE OF NEPALESE COMMERCIAL BANKS

Abstract

Mergers and Acquisitions plays crucial roles as a financial tool which helps companies to grow rapidly and providing the good return to the owners and investors simultaneously. A merger is the combination of the similar firms and becoming one as the distinct entity, whereas in acquisition, acquirer entity acquires another entity and run under the acquired entity. A mergers and acquisitions has been taken as an important tool to control the unnatural growth of BFIs by central bank of Nepal. The terms merger and consolidation uses synonymously but they have different legal meaning. The intention of the study is to analyze the current financial situation, to examine the influence of merger and acquisition on return on financial achievement of sample banks. To examine the relation among return on assets, market price per share, non-performing loan, earnings per share, return on equity, credit-deposit ratio, net profit margin and capital adequacy ratio of sample bank. In this research descriptive and causal comparative research design has been anticipated. Descriptive research design has been anticipated for the identification of the level or position of mergers and acquisitions. Further quantitative research methodology, four commercial banks as sample, primary numeric data, data was collected by observation and financial indices used are ROA, MPS, NPL, EPS, ROE, CDR, NPM and CAR in the research. The Research used financial tools and statistical tools like descriptive statistic, correlation, paired t-test etc. After merger the financial pointers are in diminishing movement. ROA, MPS, EPS, ROE and NPM are decreased but decreased NPL, increased CDR and increased CAR shown the positive result, and in combine, other variables decreased, increased CDR and increased CAR shown the positive results, others remained the satisfactory, since they all are in positive direction. In the correlation analysis after merger also there is same level of the correlations among the variables. Variables are positively correlated other than NPL. After merger among the four banks NIC Asia has only performed good by analyzing the financial performance. As per the individual pair t-test decreased MPS of GBIME, increased ROE of NIC Asia and decreased ROA, MPS, EPS, NPM and increased CAR is validated by the paired t test. By the paired t-test of sample commercial banks only increased CDR and CAR validated that implied there was a differences in a CDR and CAR is found after the merger.