The Impact of Mergers and Acquisitions on Financial Performance of Bank and FInancial Institutions(BFIs) in Nepal

Abstract

After completing to write the thesis entitle “The Impact of Mergers and Acquisitions on the financial performance of Bank and Financial institutions in Nepal”. Mergers and Acquisitions perform a vital role in the development of economic and enabling firm achieves varied objective and financial strategies. In Nepal have been merging with the goal of improving their financial performance. Most study has observed that observed that mergers did not lead to an improvement in financial performance as indicated by their profitability and earnings ratios. This study examined the bank that have merged or acquired in Nepal for the period between 2011 and 2018. The study has guided by the following specific objectives: To determine effects of mergers and acquisitions on the profitability, liquidity and asset quality. Using the different financial tools like net interest margin, return on equity, return on assets, credit to core capital and deposit ratio, cash and bank balance ratio, liability to total assets ratio, non-performing loan ratio, loan loss coverage ratio, loan loss provision ratio and research made use of secondary data obtain from the bank’s annual report and statement. Covering a period of 2011 and 2017, the work evaluated the performance of Nepalese banks and financial institutions before and after mergers and acquisitions the using paired sample t-test. The collected data was analyzed using SPSS. The study found out that merger and acquisition provide mix result.

Profitability and ratios after merger and acquisition are decline but asset quality ratios after merger and acquisition are improve. But there is not statically significant change before and after merger and acquisitions. The result shows that merger and acquisitions provide positive signal in BFIs. Based on the finding of the study recommended Nepal Rastra bank should improve merger and acquisition policy and bank and financial institutions also take different corrective actions while they are going merger and acquisitions and they should focus shareholders wealth maximization not only fulfillment of capital requirement set by NRB.