An Analytical Study on Impact of Merger and Acquisitions on Physical Performance of Banks

Abstract

An effective economic system is indicative of economic well-being, which is closely linked to ethical banking practices and procedures. A robust banking system is capable of fulfilling its commitments to depositors promptly and enhances the effective utilisation of resources. The current banking industry has significantly facilitated the socio-economic progress of the nation. The banking system's business environment has rapidly transformed due to economic globalisation, intensified competition from both domestic and foreign institutions, and advancements in technology. Mergers and acquisitions have emerged as a vital method for geographical expansion. An acquisition normally refers to a situation when a corporation obtains administrative control of an existing company by purchasing a majority stake in that company. Merger refers to the integration of two or more existing firms into a single entity.

The purpose of the study is to examine the physical performance of banks by using four parameters of employee productivity such as Deposits per employee, Advances per employee, Business per employee and Profit per employee and four parameters of branch productivity such as Deposits per branches, Advances per branches, Business per branches and Profit per branches by considering the five cases of mergers and acquisitions.

In order to analyse the effect of a merger and acquisition on physical performance, the T-Test has been applied. The charts had been prepared using the pre-merger average and post-merger average components of physical performance. It indicates that the  physical performance of the selected anchor banks has shown significant improvement. In line with the worldwide trend of mergers and acquisitions (M&A), it is imperative to promptly reconstruct the Indian banking system by mergers and amalgamations. This would enhance its capitalization, automation, technological advancement, and competitiveness.