Title: Impact of merger and acquisition on the efficiency of Indian banks: a pre-post analysis using data envelopment analysis
Authors: A.R. Jayaraman; M.R. Srinivasan; R. Arunachalam
Addresses: Department of Statistics and Information Management, Reserve Bank of India, Bangalore 560 001, India ' Department of Statistics, University of Madras, Chennai 600 005, India ' Department of Economics, University of Madras, Chennai 600 005, India
Abstract: This paper examines the impact and efficiency of Indian banks pursuant to merger and acquisition using data envelopment analysis. The impact has been studied by comparing the efficiency of merged banks three years before and after the merger. To validate whether change in efficiency of banks is due to merger effect, this study compares the efficiency of merged banks with non-merged banks. Further, through interval estimation, this paper provides how close or far away the banks are from the efficient frontier. It is observed that technical efficiency of merged banks deteriorated immediately after the merger and showed improvement from the third year of post-merger period. Further, the effect of merger and acquisition on the profitability and operational cost of merged banks, in general, is not significant during the initial phase of merger, i.e. initial three years.
Keywords: mergers and acquisitions; M&A; DEA; data envelopment analysis; banking efficiency; technical efficiency; India; merged banks.
International Journal of Financial Services Management, 2014 Vol.7 No.1, pp.1 - 18
Accepted: 06 Jan 2014
Published online: 03 Jun 2014 *