Long Run Financial Performance Analysis of Pakistani Banks After Merger and Acquisition in comparison with whole Banking Industry

Abstract

This research is to test the impact of mergers and acquisitions (M&A) on the financial performance of banks in the long run period on the acquiring firm in comparison to the Industry. The research uses the long-term post-merger published data by state bank of Pakistan (SBP) of the selected banks and the industry to investigate the long-term performance. It compares performance of the acquiring firms and the industry. The present work conducts a comprehensive ratio analysis of 25 major ratios related to Capital Adequacy, Asset Quality, Management Soundness, Efficiency and Liquidity. Three banks are selected for this study and analyzed for the post-merger profitability the banks are Bank Islami, Bank Albarakah and the Faysal bank limited. Twenty-five ratios for each bank individually and the average of these three banks were compared to the industry averages. For the purpose of the ratio analysis paired sample T tests were applied with the help of SPSS. At the end the researcher found that the merged bank has ratios significantly different from the industry averages. It is concluded that in long run the performance of the merged banks in Pakistan is significantly different from the industry averages. As we look at the ratios of Faysal Banks twenty-one out of twenty-five, Bank Islami fourteen out of twenty-five, Bank Albarakah sixteen out of twenty-five and if we look at the banks average Nineteen out of twenty-five are significantly different from the post-merger industry ratios.