The effect of merger and acquisition on the performance of banks in Nigeria

 

Ajayi Lawrence Boboye* and Obisesan Oluwaseun Grace

 

Research Article | Published June 2016

Journal of Economics and International Business Management, Vol. 4(1), pp. 22-29.

 

Department of Banking and Finance, Faculty of Management Sciences, Ekiti State University, Ado-Ekiti, Nigeria.

 

*Corresponding author. E-mail: boblaw2006@yahoo.com.

 

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The study evaluated the effects of mergers and acquisitions on the performance of selected Deposit Money Banks in Nigeria. The profit after tax was used as the explained variable that served as a function of shareholder’s fund, total asset, loan and advances, and total deposit that are explanatory variables. The research made used of secondary data, obtained from the bank’s annual reports and statements of accounts spans from 2001 to 2014, the study employed Ordinary Least Square. Johansen Cointegration Techniques has shown from the unit root test that most of the time series are non-stationary series that only become stationary after first differencing, and Error Correction Model shows that there truly exists long-run equilibrium relationship among the variables. This is evidenced by the coefficient of one period lag which is statistically significant and correctly signed (-0.804397) with a probability value of 0.0048. The result showed that merger and acquisition has no significant impact on banks’ performance of the selected banks in Nigeria. Based on the findings, the study recommended among others, that Central Bank of Nigeria should ensure that only strong banks can merge so as to form mega bank in order to achieve the synergy that the bank consolidation promises. The study also recommended that Management of Nigerian banks should be discouraged from unethical banking practices and regulatory authorities should use their searchlights on the Nigerian banking industry in order to curb financial crimes being perpetuated in Nigerian banks.

 

Keywords: Merger, acquisition, deposit money banks, central bank, Nigeria.