EFFECT OF MERGERS AND ACQUISITIONS ON BANKING SECTOR PERFORMANCE IN NIGERIA

Okoye, Lawrence U. and Modebe, Nwanneka J. and Achugamonu, Bede U. and Isibor, Areghan Akhanolu (2016) EFFECT OF MERGERS AND ACQUISITIONS ON BANKING SECTOR PERFORMANCE IN NIGERIA. NG-Journal of Social Development, 5 (5).

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Abstract

Over the years, the Nigerian banking sector has undergone a series of reforms aimed at enhancing its capacity to support growth in the real economy. To achieve this aim, there is ample evidence that the Central Bank of Nigeria has relied heavily on bank capital reforms in tackling problems of under-performance in the sector. Implementation of these reforms has often led to a simultaneous reduction in the number of banks and increase in bank size, a process commonly referred to as consolidation. Mergers and acquisitions are common strategies adopted in the implementation of consolidation programmes. This study seeks to examine the extent to which banking sector performance differs between pre- and post-merger and acquisition periods. Return on assets, bank asset ratio and capital adequacy ratio were adopted as proxies for bank performance. The study employs ex-post facto research design and covers a period of nine (9) years before and nine (9) after the 2005 banking sector recapitalization exercise. Data on the variables were analyzed using the independent sample test technique. The study finds that there is non-significant negative difference in the performance of return on asset in the pre- and postmerger and acquisition periods. Bank asset ratio shows significant positive difference between the pre- and the post-merger and acquisition periods. However, the result shows significant negative difference for capital adequacy ratio between the periods. The study therefore concludes that mergers and acquisitions have significant impact on banking sector performance in Nigeria. We recommend that due diligence should adopted in the identification and selection of compatible partners in order to achieve synergy. In the case of policy-induced merger and acquisition, a reasonable time should be allowed for compliance and implementation should be closely monitored

Item Type:	Article
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting H Social Sciences > HG Finance
Divisions:	Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User:	Mrs Patricia Nwokealisi
Date Deposited:	14 Jun 2017 10:33
Last Modified:	29 Jun 2017 14:59
URI:	http://eprints.covenantuniversity.edu.ng/id/eprint/8203

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