APPENDICES
1. Publications in Referred Journals (2)
1. Durga Rao, S & Prasantha Kumar, R. (2013 a). Financial Performance of
Evaluation of Indian Commercial Banks during before and after merger.
Sumedha Journal of Management 2(1), 117-129. [ISSN 2277 - 67531.
2. Durga Rao, S & Prasantha Kumar, R. (2013 b). Physical Performance of
merged banks in India: A comparative study of public and private sectors.
Gitam Journal of Management 11(2),40-54. [ISSN 0972-740x1.
11. Publications in Conference Proceedings I Edited Book (4)
1. Prasantha Kumar, R., Durga Rao, S and Jyothi, R.R. (2013 c). Financial
Performance of Andhra Bank during Global financial crisis: A CAMEL
approach. Dept. of Management Studies, (Eds. Dr. B. Amamath), S.V.
University, Tirupati.
.
2. International Conference Proceedings, Bharathiar University. School of
Management and Entrepreneur Development held on 9" and 10' of January,
2013. (Accepted). Title: Impact of Corporate Social Responsibility on
Corporate Financial Performance: A Case Study on IClCl Bank.
3. Murugaiah, K., Jyothi, R.R., and Prasantha Kumar, R. (201 1). Best Practices
of Field Work Curriculum: An Overview. Professional Social Work - Best
Practices and Innovations in Teaching, Research and &tension (Eh.),
Authorspress, New Delhi. [ISBN: 978-8 1-7273-510-41.
4. Jyothi, RR., Murugaiah, K., and Prasantha Kumar, R. (201 1). Child Survival:
Need for Government and NGO Participation. Professional Social Work in
India Rhetoric and the Realily (Ed.),
Western and ZahmrHussain
Publication. [ISBN: 978-81-9014-896-41
III. Conferences (3)
1. International Conference on Corporate Governance held on 30' and 31''
January, 2013 at Dept. of Commerce, S.V. University, Andhra Pradesh.
Paper Title: Corporate Governance Practices of Indian Banking Industry.
2. A 9' International Conference on Business and Finance (ICBF) 2012 held on
6' and 7' ~
m2012 at
~ Icfai,Business School, Hyderabad.
Paper Title: Impact of Mergers on the Financial Perjtormance of Indion
Commercial Banh
3. Participated in two days Annual Bankers' Conference, 201 1 (BANCON) held
between 4' and 6~November, 201 1 on "Competing in the Defining Decade
for Indian Banking" organized by Indian Overseas Bank (IOB) jointly with
Indian Banks' Association (IBA) in Chennai.
IV. Seminars (9)
1. National Seminar on "Risk and Insurance Management-Contemporary Issues
and Challenges" held on 22" -23" December, 2012 at Department of
Commerce, Sri Venkateswara University, Tirupati, Andhra Pradesh.
Paper Title: Growth and Development of Insurance Sector.
2. National Seminar on "Industrial Development and Inclusive Growth during
the Reform Era" held on 28Ih and 29"arch,
2012 at Department of
Economics, Sri Venkateswara University, Tirupati, Andhra Pradesh.
Paper Title: Bank Finance for the Development of Small Scale Industries
(SSIs): An Analysis During the Industrial Reforms Era.
3. National Seminar on "Psycho Social and Human Rights Interventions in
mitigating the problems of disaster affected people (with special reference to
Natural Calamities)" held on 24' and 25' September, 201 1 at Department of
Human Rights and Social Development, Sri Venkateswara University,
Tirupati, Andhra ~radesh.
Paper Title: Role of Government in Disaster Management.
4. National Seminar on "Emerging Trends in Financial Services: Challenges and
Opportunities" held on 2 5 h d 26' August, 201 1 at Department of Business
Management, Sri PadmavathiMahilaVisvavidyalayam, Tirupati, Andhra
Pradesh.
Paper Title: Predicting Financial Distress using 2-score Analysis.
5. UGC National Seminar on "Micro Finance: Issues and Implications" held on
27' and 28' March 2011 at Department of Commerce, Sri Venkateswara
University, T i a t i , Andhra Pradesh.
Paper Title: Micro-Finance Institutionr: Expansion Strategies.
6. UGC National Seminar on "Micro Finance: Issues and Implications" held on
27' and 28' March 2011 at Department of Commerce, Sri Venkateswara
University, T i , A n d h Prade~h-
paper Title: women Entrepreneurship through SelfHelp Groups.
7. National Seminar "Social Welfare and Inclusive Growth and Development
with Special Reference to India" held on held on 25" and 26' September 2010
at Department of Commerce, Sri Ramakrishna Degree & P.G.(Autonomous)
College, Nandyal, Andhra Pradesh.
Paper Title: Inclusive Growth: Policies and Challenges in India.
8. National Seminar on "Entrepreneurship - Catalyst for Women Empowerment"
held on 21" and 22" September 2010 at Department of Commerce, Yogi
Vemana University, Kadapa, Andhra Pradesh.
Paper Title: Role of SelfHelp Groups Promoting in Rural Empowerment.
9. UGC National Seminar on "Strategies for Lifelong Learning and Earning"
held on 13" and 14' August, 2010 at Department of Lifelong Learning and
Extension, Sri PadrnavathiMahilaVisvavidyalayam,Timpati, Andhra Pradesh.
Paper Title: Learning of Women through Eras: Policy Perspectives.
V. Workshops (5)
1. National Workshop on "Latest Trendr in Global Management" held on 24'
September, 2011 at Siddharth Group of Engineering Institutions, Puttur,
Andhra Pradesh.
2. National Workshop on "Promotion and Protection of Human Rights" held
from August 14"o
18', 201 1 at Department of Human Rights and Social
Development, Sri Venkateswara University, Timpati, Andhra Pradesh.
3. National Workshop on "National Programme on Technology Enhanced
Learning (NPTEL)" held on 5 h d nd6 April, 201 1 at Indian Institute of
Technology Madras, Chennai, Tamil Nadu.
4. National Workshop on "Art of Writing Research Article in Commerce and
Managemenr' held on 23 and 24 October, 2010 at Department of Commerce
Financial Studies, Bhmthidasan University, Tiruchimpalli, Tamil Nadu.
5. A one week National Workshop on "Research Methodology" held between
6'1 and 21 August, 2010 at Osmania Unil~ersityCentre for International
p m m e s , Osmania University, Hyderabad Andhra Pradesh.
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I
There is less number of studies on physical performance .of merged
banks. Hence, the prepresent study is focused to evaluate physical ~~rformance
of merged banlct in India.
Rationale for Mergers a d AcqpiSitiooa
There has been an mcrease mthe number and slze of M & As aaosacUons
m aU seetors of the company, espenally in the financial services sector
Deregulahon and advances ~nfechnology are wrdely held as unporrant factors
that havc ended tbe dIshnchon beoveen banks and f i d tntemxdkmes
and h s has huther led to an unpatlulled nse m number of M & As m
fmaocial cornparues ~RDSS
globe Besldes. to face tbe ever-mucreasmg
mmpehuve pressure tbcsz c 0 m p ~ e . smay look for M & As are means to
oham scale of economies and e5c1e1k3 gasns
Humpbey. Wdleson, Bergendah1 & &&~lom (m)
argues that busmess
consolidation occurred orimarilv because of financial and tecbnoloaical
innovation &at altered &e
produciim functions of financial &IS.
It p v i d c s a range of bem5t.s to the partics involved in the deal. Piper
and Weis (1971) argue that M & A s occms to ovcraome geographical limits
on bank expansion. Hannan and Rboadcs (1987) rejects tbe hypo%hesis that
poorly-mauagcd firms are morr likely acquisition targets than other firms
Cbaog, Gup. and W
a
l
l (1989) ti& a
in support of rpengkeering
6s a -vation
fpctor for hank acquisition. Phillips and Pave1 (1986) found
tbat aoquiring finns use mexgm as a vchicb to iocrease tbeir marka share
add profits. Roae (1988) m1~:1desthat the mergers results in i n c r m in
profittbility, markt s b a q growth rate, marks power and stock price and
denease in tax liabilities. Cheog. Cup, and W
a
l
l (1989) and Palia (1993)
mnclmfe thar m w business oppommities play an important role in banl's
takeoycr.
SIIUIV~S, K.(2010) found that the Peposits. Advances, Business, Number
of Branches, Number of Fmployees and Rofits of both pubhc and pnvate
banks w e nnpm%tsedafter mergers Funher, h s results revealed that Pnvate
sector banks were dormnahng over Pubkc sector banks Narayan, C Baser.
Mamta Brahmbhatt (201 1) found that tbe Earmng per Share. h r d e n d per
Share. Pcpos~ts.Advances and Profit &I Tax were unproved dunng post
magcra Padmasre Jalandhar, K Bhxatb~Devi Anchula and Achan, A S I
(2011) malted that the performance of sample banks 1s rmproved dunng
the post mergers In tenns of growth in Total Assets Profits, Revenues,
laveslmcnts and Deposcts Ishwara, P (2011) evaluated the performance of
Regtonal Rural Banks' amalgamahon m Indla tn tenus of Number of RRBs,
N m b u of bmwhea. Deposits, and Total Assets and were amproved due to
unnl@mahons
.
1.
To evaluate physical performance of merged banks during pre and post
mergers.
2.
To compare the physical puformaoce between Public and Ptivate sector
merged banks.
Research Hypotheses
Growth of deposits is independent of bank mergers.
H
:,
G:Gm? of advances is i n d e p d e n t of bank merge=.
%: Growth of business is independent of bank mergers.
%: Growth in number of branches is independent of bank mergers.
&: Growth in number of employees is independent of bank mergers.
%: Growth of Assets is independent of bank mergers.
There is no significant difference in growth between public and private
H,:
sector banks in terms of physical indicators.
Data and Methodology
.
As recommendations of the Second Narasimhan Committee Repon
(1998) on banking. there were six Public Sector Banks and three Private
Sectors banks involved in merger activity during the period between 2003
and 2010 and the same were considered for the ptesent study as dvcn in
the table 1. The present empirical analysis on physical perform&e oFmerged
scheduled commercial banks durine ore and cost mereers. Two reeression
models are formulated to measure thentributiin of selecied physical inkcators
towards Rofits and Return on Equity for wbde, pre and post-merger periods.
The required data were collected from "Statistical Tables Relating to Baolrs
in India", an antmd publication of the R-e
Bank of India. The coUected
data 1s divided into three years before and after-mergers, as it may reap the
complete efficiency gains within the threc years (Rhoades, 1998).
T&I:
e
t
b
SNo
M
I
2
P~lnjabNUioonl Baek (PNB)
M of BIlmda (BOB)
OritnWBloLof
<OBQ
tClCl
IDBI
PedsnlB.n*(FB)
Indim OveBank nOB)
3
4
5
6
7
8
9
e be&
M
W B.nLs
Date of Merger
h
.
h
-
HDR
SUte BBnL of TIXI% (SBn
phTsk.l P6-r-
m of the
Ned-adi
Bank Ild.
South Guj-t
Losal Area Bank
Global Tsurt Bank Ld.
S q l i Bank
UmCed Wcatcm Bank
w s h Bank of Kurandwad
BhOvcBank
W o n Bank of Punjab
S w B d of Sa"rashm
'
and tested its sigoificance also. The mean growth was calculated wifb the
followmg formula
1-2-2003
Growthr a t e =
25-6-2004
Postmerger -Premeger
Premerger
x 100
14-8-2004
1942007
3-tCL2006
2-9-2006
3 1-3-2007
23-5-2008
14-8-2008
Indicators
Devamja (2000) examined the physical and financial performance of
a horticrrlturc -tive
society by using the v e a h ! n like mnlbenhlp,
retail outlug shzue capital, owned funds, total assets, long-term investments,
fixed .ssets. wnLiog capital, total liabitities. and sales. Shekhar ct al. (2003)
sIudicd thc growth rates of physical indicatm's of disUict cuoprative banks
on tbe variabls like rmmba ofbranches. numbe~
of employees, membership.
number of loan accounts and mnnba of deposit =accounts.
Harshitha, GS.
(2007) analyzed physical pzfamamx of district m
v
e banks in terms
of groM1, in number of b m x k s e a p l o y a s m e m M p w d deposit aca,rmts.
Bihamjit Singh (2011) adyzed thc groarth rate of sIected banks in terms
ofdqmits, number of braacbes. employd
t deploymmt and borrowings.
Thephrsicatpcrf~indicatorsutilisedinmeptseot~~
of Deposits. Advaoceq BusNumber of Branctn, Number of Employees
and Taal Asw*i ba%cdon thc preview studiea in order to evaluate physical
# a ~ ~ l ~ n o eof merged scheduled commgcial banks in M a
Regression Model
The relationship between Profitability and its determinant of banks was
analysed using regcession models by Bourke, 1989; Molyneux and Thommon,
1992. Sharif Rayhan Scddique., and Mafuul Islam, A. E M.,2001; DCvjnaga
Rasiah, m10: Poolad Danashvar., and Ramesb, H.N., 2012. Th variaMes
used in the prrsent regression models were cxnaEled from thc above literaawe
on the bank pmfttability. There is an invase relationship between deposits
and profitability and hence Ibe deposits are excluded from the study. S h .
tbe business of bank wmpxises deposits and advances it is also excluded
from the regression model. TI%- are two regression models separately
fomdated wilh dependent variables (profit afta tax and Return on Equity)
and independent variables (Advanncs. Number of branches. Number of
employand as-)
during whole study. prc-merger and post-merger period
and the equations are as follows:
+
+ p3 Emp', + p,Assetsit
+ p3 Empl + assetst st,
P r o f i t i t = P o + & Adwit
p2 Brana
Adwit + p2 Bra%
RoEit =Po +
Where.
profitfitv
t
s Prof* for bank i at time
0, 0, 8,.Br 40.
Bmn,
e,
andAsset.
= martnot
of E b p l o y a s aod Total Asrts r e q a ~ i v d y .
B.ntwis~groa?h~aof~thcph~ulpwmcersrueremmplted
bycoaridaiog~valuesofpcandpDstmagas. ' I h e ~ d e v i a t i o n
is computed to lorow the vaciabil*
in the data As a di an unequal
gtandard&viationw~obsmdbetwaa~pre~postmrgas.
H-.Wdcfis
pired last (a two sample assomin&unequal V a n a ~ a was
)
appliedto dctmmk
significaot impmv-t
between pre and post mergas.
The grPwth rates
of physical indicators are cornparrd baMen public and private sect- banks
1
ROE, repnxnts Rmnn on Equity for bask i at time t
Number of Brancbm, Numba
46
QITAM Jamwi a
w and
Mrnu~~~err
Discussk.=
roarc 2
cmwb ot apoara
(Rr
Irst
M-
Growth
nn
Posc-r
b-r
t-vnlae
5591261 333(%32227)
1035894033(15888473
85 27
4 604'
6071S87(626128)
9997047 667(2246567)
64 64
2 9151-
0%
2765930333(266295)
5401458 667C872343)
9528
50048'
RIBS
1039436 33x4545073
7625100 667C3463824)
633 58
3 265lm
K
1
1
a
11100351(4944532)
22159849 67(2139325)
99 63
3 5555'
W
1320% 333(213566)
2656532 667(533682)
101 16
402548'
lea
-47(381637)
84393% 667(1568784)
106 81
4 675C
HDH: 534KXW.333(1609705)
17293414 3313323424)
223 34
5 6027"
SBI
8267073%9790456)
10971
7 1726-
&I
" si#,yh-T
DI
oar
147.11
6078995(1391633)
299.28
4.1052'
HDFC
3585744.667(1071145)
12823210.33(3062052l
257.62
4.9321"
SBI
26711749.67(6764744)
64371226.67(1075%36)
140.98
5.1322"
-
-sig"@mm
Si&acc
rcW1
I-el
cr
0.05 rme1
0 01 &I;
.You.
Th. fis-s
ir p-
indisndisUr sf&
4.8616'
-66
The secondary function of a commercial bank is to issue loans and
a&to d
l types of persons. Advances by wmrnencial banks are made
in different fonns such as demand loan, term loan, cash credit. overdrafI
etc. The bank wise mean growth rate of advances and tbe significancegrowth
between pre and post mergers as presented in the table 3. The advauces
of JOB recorded the highest growth rate (229%) whereas BOB accounted
for a least growth rate of (93%) among all the merged banks. The overall
advances 'of ihe merged banks improved significantly duriog post magers
except BOB.
&"el
M ru 001 Iml. Nne
dep6r.v
1s
m
,ismms
a pa=-
~ C O f C c o f c&"i
dew',-
the pmnary fuocnonon of a commeslal bank by
m & W L s z g sfrom tk public for ils mbxnx&ahcm process. The deposlts
of public depmts, savings, bank deposlts, demand deposits,
mlsallamous deposits and deposits oufs~deW a The bank w ~ s emean growth
iatc ofdep&x nnd the significance Improvement between pre and post mergers
as BhOIHn m tk table 2 The depw~tsof HDFC bank reached the htghest
g m d mte (223%) whereas BOB recmded a least growth rate (64%) among
aU the merged banks. The overall deposits of the merged hanks ~mproved
sigmiicanily dunng post mergers except BOB and DBL
comprises
BuL
1873188.333(374937)
1522484(1326322)
Wekb's
(46)
BOB
394za4890636635)
758021.3333(130669)
IOB
m kzkhsi
PNB
-S1-
FB
-
(Rs in in)
Maa
Grod
Pmt-me-
rate
(%I
Welch's
Man
Prr-mergu
P
&
-
PNB
8423601(1421912)
BOB
9286278.333(1040152)
10992945.52V335932)
OBC
4129647.667(500321)
8835289.333(1793616)
rnBl
2944025.667(2714501)
15896033.67(5510608)
IClCI
21089143.33(9210958)
42997599.67(437%52)
FB
2078581.667(344199)
4529721(906277)
IOB
5603231(1702970)
14518391.67(2960284)
HDFC
893404X2669346)
301 16624.67(6380799)
SB1
66132238.67(10312930)
147041965.7(20521057)
16434435.33(2959299)
t-dye
'Si~~iF.-e
SigNfi-e
k-"el ot 0.05 &vet
h
i rn 0.01 I m l ; Note, 7hc Iigures in p-uheheii indiscllu stamdad d c v i d m
The business of auy commercial hank is Ihe total intermediationpxes.9,
i.e. mobilising deposits and issuing loans and advances. Ihe hank wise mean
growth rate of business and the significance growth between pre and post
mergers as narrated in.the table 4. The advances of D B I marked the highest
growth rate (439%)w h w BOB recorded the least p w t h rate (18%) during
fhepost-merger period. The business of ihe merged banks improved significantly
dwing post mergers exaept BOB.
14069(3721)
36201(3936)
157.30
7.07658"
6351(128)
7043t488)
10.90
2.3754
IOB -
24256(97)
25611(1012)
5.5847%
2.M73
HDFC
15128(6227)
53442(2039)
253.26
10.1272"
1%559(10244)
209709(11789)
6.69
1.4583-
IClCI
FB
SBI
-
BOB
2700(45)
1%2(1334)
-27.32
OBC
%2(28)
11831773
22.W
4.6106'
mBI
66(30)
480(41)
623.62
13.8316-
IUCI
48704)
1145(347)
135.02
3.2109
FB
439f17)
583(41)
32.85
1.4601"
"
5.5710'
IOB
1490(251
28.87
9.0892'
WE
562(110)
1707(287)
M3.86
6.4410-
SBI
W9(79)
12625(1079)
36.65
5.4209-
..
.
swqi-.=
- simi/i-.ce
1920(m
k l D1 O M k"d
&I
nr 0.01 Lml. Hau rhe fi6rm.s i. -b
&*,
Human resource is the most valuable asset of any aganization to serve
aU the spheres of any business. The employes considered for the present
rmdy includes officers. clerks and sub-staffs. Tbe bank wise mean growth
rate of number of employees and its significance improveImn1 &%ween pre
and post mergers is illustrated in the table 6. The number of employees
of IDBI reached the highest growth rate (223%) where both PNB and BOB
ream!& a decline at a rate of -3% and -7% respectively among all the maged
banks. The number of branches of the merged banks improved significantly
during post mergers excep PNB. BOB, FB and IOB.
dm-"
The geographical expansions of bank bmnches are essenbal for saving
pamtial customen anoss the areas. nx bank wise man growth rate of
brenches and the signiiiumce improvement h(p m and post m m g ~ ~ ~
as -bad
in the iabk 5. 'Ihe numbcr of bnnchs of IDBI acmumed
for the highest growth rate (623%)wbcreas BOB reaorded to a stdecline
of 27% g
all the merged birnks. The ovaall o u m t u of brnocbes of
the he mcrgad bpmved significa~~liy
during post meagas e x c e p BOB
and ICKSI.
"
m
BOB
OBC
WBt
KlCI
FB
10B
HDFC
SB1
7be total rsacu rd banks comprises of a h balamer. investmnts.
&
wise nmn # rate of aSeC3
advances and fixed a s e i . ~&. Tbc b
w
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The f k i regression model redud as sbown in the table 10 represents,
Pane1 h B & C the difkmtial intercept coefficiens for all the three periods.
All the ind-t
variables used in ttus model are insignificant at 0.0.5
k v e l s The computed R square value (0.775983) of the Panel C suggests
that the selected physical indicators c o n ~ b u t e dtowards profits during the
post merger period only.
should plan properly to reap improved performance, which tends to become
the leaders of this sector to sustain their position in the global competitive
world.
REFERENCES
I.
2.
V.rhbks
Codkicr)t
1-
20.1767
Advma.
0.0001
No. of B r m c k s
t-mdus
4.0001
0.3865
4.00'75
2.1647 ms
Tool Assets
0.0005
2.2625
R
0.5809
-
0.3040
Sig&5c(~.u ru 0.05 &I;
Sigmifisim 0.05 M
* Non
r-valus
22.7059
0.2830"
-0-
NO. of
CaMcisnt
0-OOM
0-2359
-
CocBrisnt
t-valuc
15.4132
O.OW1
0.7051
"
-0.00013
0.244Sa
0.CCnl
1.7354 rcs
0.W65
1.1747
0.0055
4.4290
.
O.CCn3
0-9839ms
0.0006
5.7197
.*
0.92482
-
'
I
&
W W focurPcd ar the physical pufcnmaux ofIndian bank
m % r r ~ ~ y a r ~ 2 0 ~1p 0
h y. s i c a l p a d a n r m f e i s b d o g ~
I ~ ~ SoWIb
Y s
of Drporits. ,
Business, Number
of branches, Nllmbcr of employees and md assets.
The overdl physical performance of the merged banks showed
s i g a i f i c d y amptilied d t s during post meexcept Bank of Bawh,
The d s s t d phy§ical indicemn mmlxibuted tow&
both Profits and Raurn
Equity of thc banks during post-merger puicd only. Fmally. the banks
out rn
3
Bibamjit Singh, 2011. .'Stludy of d x Grad Asof B
&
A Oomprrnrive Srudy
of HDFC and S B O r I n d m l l Journal of R s s e a n h io Finaocc 61 MmkCiiUg.
1 0 ; 59-71.
4.
B
&
.
P, 1989."~oacsnmtiooand O U r r Lklsrminnnts of B d Rofirabitity in Euopc.
NoRh Amris. d A1-a1
of Banking and Pi13. 65-79.
m.
~pplicdMcrgm d Acquisitions. John Wilt], & Sons.
5.
Bnmsr,
6
Cbcog, S..
3-ll
7.
Inc., H-
y pp. 45-50.
New W
L. Cup, and Wdl, R, 1989. "
oZ B d
F ?
21 (4): 524-536.
of Moluy, c d t snd Banking.
m".
- A.UWnormk eV&WiLXILXI.
Demmj4T.S. 2000.Texfomurrs of HOPCOMS.
M.C-.-Rev.,
38 (2); 82-96,
-
8.
~
R
r
d
r
h
u
)
l
O
:
~
~
a
t
B a t s in W y N . Eznqean hmrmd of Exonomb. RD.IICe snd A
nSci19; 765%
9.
~ Y - R R L l d . ~ Z O l 1 . T ~ u ) l I - S a b o g I h ~ f a r c b c o a l
era of M M
raaiey.~MiaiodvwLU-..~01~_20Il-#
lo.
w.T.
ru O . o l ( n r l :
'Ihc mmRs of the second qyesskm &I
mmated iu the table 11
with differential
wefficiafs
for all the hperiods. AU the variables
nr: insigdkant at 0.05 level except numbs ofemployees and Total Assets
in pami C .nd these tw arr the only significaot
of the ROE. The
calculated R square value (0.9248) of panel C suggests that t
k seleaed physical
indicators contributed towads ROE of the banks doring p 0 s i - m perid
&Y.
Banknet India. uX)6. MBA in Indian Baolring SysCrm - h EXecutivc HaodbOOk
PZI
Bhario, T. M. 2012. 'Tczhbanking m a i m inthc Fuauistie Miu, Bankkg System".
Baocon - 2011 Chnfereoce. pp.27-34
of dY
K, m d ltbwles.
w
w
.
o
f
~
u
*
s. A.
1987. -A+T p ~ e t amd Motives:
Fkvior of EeoDaoic* a d Sutinie. @br&):
67-
74.
11.
- -
~ G S . m . M l l A l r p l i d o f - - ~ -
-AChed~Bm*S~IomutrMS.Uoivaritrof~Scimm,
wul*d
IL
G & Lt.dblw 7. 10M &eFo from
-",
of bmk
30.
Hmqbrcy. D.B., W%M..
Ia
m&,. Pl)mar T d . s d o m b
1631-1652
13.
---
IrBaur. P. 2011. 'A F
T - f d a "
14.
ibr,
i
Jmmd
of
R e u a ~ h ,20); 142-151.
R.W. M06. Mcrgr. d Arpasirirm by UNEa'
fsnaq
-
Aatlyrir of RRBs: Rt mrd PaU
4 Perf-
IS.
M a d y y x . P. d Tbmmon I. 1992.
of
A w. I
d of S W n g d FlDIDa 16; 1173-1178.
16.
~~rrimhao
U. 1998.
Ctuptcr
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~ u m ~ ao qq (~9 0 0 ~IELOD 18 u e d s&bm aierauro[Zom poe 'fk#rrai\
'InUOZUog aio S ~ % W m o a ~ ei saurorraq $1 F O J sr u o r t l a d m am rraq*b inq L p m j a m
kq i ~ ~ e m u a uo~$~prlosuoo
g
lo uo~~d.iosqe
ai\loAm d m a Z l a w m q d ( a u a a w JO A
~g
iuedmos pa1we8[eure am 30 slap~otp~mls
am au-q
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ayL iaZmm JOJ .uor$eureX~m,
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VJowaweJd lenadaauo~
IU-*B."=N
P
I=J-P
warns
SUWEDW Journal of * . l u g e m
W l He+..h-
Calonnris (1999)and Howam et al ( I 994j found that bank mergers enbaoced the efIicreocy
Akbavea~et a1 (1996) found a n ~mpmvanentm profit especially ~f both merger partners were
u n S a e n t before the
Allen N Berger and Ra (1996) found maeased scale of eunomes
The types of cod e f l i c ~ a ~gams
~ y rekvanf to Europe may be rather Merent than those fwnd lo
the US. B a ~al. (2000) f
d that, tbe foreign banks faced higher operating costs and lower
P0*biliw
,
d"-ti~
w. Spindl and Tarhan (1993) and Cornen and Tekanian (1992)
fouod sllficant
wO-ts
in Return 00 Equity, Profit Margin, Employee productivity, growth
of-,
1and depmie due to -.
B.D. Diaz et al. (2004) concluded that the acquirerxs
I%-*prohbili@' and pafwere increased due to acquisitions.
it was more
significant for bank
t b n for ~ n - b a n kacquisitions. Prager (1998) showed that US
banL mzwm led to increased market power.
eiti-
(1994) and
*
(19%) showed no evidence on effrcrency g a k 6bank magaS.
(1998)
niw case studies on mergers, resutted in slgnsicant
in line
we-projections. Four of tbe nine -gem
were ~ n t ygot sum
in
impmvising cost 6 i m c y after acquisitions. Vander vennei(2002) found
g
*
a
banks
---*
w
b
-
I&
2013
'
1
The research s m & a that were undertaken in the area of M&A in developed d p s like
Europe, Greek,USA and some of the developed Asian wunlries produced mixed resub. There
are a less number of studies on M&A's in India especially in banking -or.
At this poiat, the
pesmt study f-d
a evalmte the f i i c i a l performance of pte and past mergers d banks in
India.
Research MethodologY
cinancial
pafo-ce
of -ged
b a h can be aoalyzed using accounting ratios 01 share
wave
=he present study adopted acunulting ratios only. The lhird-gQ
price
from
2000.1ill
&te
is
so
tbecause the second N a - i h n
period in
were l 7 --gas
RepoR (1998) made r-dations
for bank mergas. ks a result3
=ame b a A the
which occuned he,,,een 2001 and 2010. Due to multiple times of -gas
to 9 banks -istkg
of 6 public sedm and 3 private sgtor banks
mulation size
be
(1 998)~omtedthat about half of any etficigaios
in the table 2. -der
years
~ e years
e of -ger.
w o r e , the p e r f o m was measured for
*
and after the merger.
acquired h u k s in terms of profit and cost efficiencies before the transaction
F*.
profit mbanced due to mergers without gains in tof -t
efficiency io
mergm. Rose (1987) showed that acquired banlrs are more profitable and Iprim to l k "g
~ a.F w t k z , he famd that the profitability did oaf
took P
-.
QDS~--
enbawx fa the .aEuiriogt-mb after acquisitions. ~ai~iani
(1997) found IIO nnpmv-t
after
-W, -Q& he did fmd mat the maged banks mtpafompd the combined results of the
mags
~ O n
m.LLioder aad
bef=
a
S
~
o
r
g
r
o
a
R
Crane (1992) famd no iroprov-e
h i n ~ ~ ~
in opaafing
At thisjuncnusit is a h 5to Ieview the Lituature on M&A in Indian context also.
(2010) fcuud
the private secta maged banks .UW
ova the pubtic -or
d
in F-ilityaod
~rsuiditybut in case ofcapital a&qacy and NF& the
are
I'km and
(2010) suggested that to
extent msga activity gat s-gded
in
h 3 h bnlio;g -.
h~
KuM*(ge (2010) showed a p i t i t - signifon m e g i c
fUngri.t
of-id
banks. ~wamioallrao(2002)studied a sanpie off i -a ~
fm
O P W and
~ financial syoergies for four fyms after aoqui~itions.
K m . 3 (2010)did UD
prwide
I
evideoee to ruppon &e irnpm-ed cmpwate perf-
-
Ja-
w
k magars in h d h bantjng. Slnjit (2002) and R a v i c h b (2010) soggmed in their r
d
that the
did not Seem t o
Ihe P I Q M a b i l ' i a n d pmdudiv= e f f i a r y of the banb as
thq.did not indicate any signiGcant diffafter magers.
a
Research HyPOthY: me
is rn s i @ m
(,)
d i f f R e m h m i d p a f v Ofto Credit D M ~ Ratio-
mprser with
H.
-=
-ga
% a sigaif-
6
d i f f a a ~ sio f m h l @ Ratio.
to Credit
w
a
mags
reference to Capital -CY
Ratio-
of banks
before ad dlt
and a%
4'
f
fE
TUEM1A Journal of I.nsg.mnt
$
4
H,
T h e a t-a'
=ace
m financial performance of banks before and afler
w t h refereoce to Cap~talAdequacy Ratlo
&fore .nd
[:)
=per
8
H, There ISa slgnifrant Waanz m financnl performance of banks before aml after
m a g s mth reference to Non-Pcrfwtllmg Am& Ratlo
He TbRe IS no s&cant
Merence m tinanclal pezfonnance of banlcs before and afier
EaQ-gex with refaence to Returo on Assas
4
T b a u no st~11ficantern f i ~ a performance
l
of b&
V
refto Nan-Paformmg Assets Ratlo
*
y:
lksc Ih a swuticant =meace m h m
merga WltbrefereaxetoRehunonAssas
l perf-ce
of baoks before and after
hniques for Evatuating Financial Performance of Banks
Thc financial raho 1s the powerful tool to d e a m the financtd paformance of the fum
they a m used to mpasure the financial performance of maged banks Among them the
are Cruiit Deposit R-0,
capital Adequacy Raho, NorrPerfomung Assets
( D i Kumar and Durga Sadcar, 2011) and hence tbe researcher
on Ass*
cative of the percentage of funds lent by
Higba ratio r d e c t s ability of the bank to
are givea by bank would also include its
of the OOmpanies.
Vo1.2.
No 1. January
- Mach 2013
on Assets (RoA) Renun on asset r a m Is the net profit 8merated by the bank On
be the
he hgher the proport~onof average earnmgs assets, the better
total assets
resultrng return on total assets
RoA =
Net profits I Average total assets
Ecowmevic Model
Felix and Claudine (2008) fouod that return re~urnquity (ROE)and return on ass& (RoA) botb
measuring profitability were inversely related to the ratio of non-performing laan to total loan of
financial institutionsthereby leading to a decline in profitability Bakar and Tahk (2009) used RoA
was used as dependent variable of bank performance and seven variables including liquidity, credit
risk, cost to income ratio, size and concentration ratio, were used as independent variables. Neceur
(2003)
. . aoolied a .ane el linear rewzssion model and repfled a suong positive impact of capitalization
to RoA. The praent study employed the followingregression model based on the previous studies.
RoA
=Po f
BlCDR
+
Bz CAR
+
Ps NPAR
The regmion models' independent variables are CDQ CAR and NPAR; and Returo on
Assets as dependent variable.
Results and Discussioos are &cussed in the following section which consists of summary
of desditive statistics, average financialperfo-ce,
powth rats, t-test and Regression analysis.
b
CapW Adegnsey Ratio (CAR)A banks' caplhl adequacy ratlo 1s tbe raho of qualtfylog
W to risk artjusted (or wghtd) assets. As p the Iatest RBI norms, banks m Mla should
ratlo below mmunum udicates that the bank is not adequately caprtalrzed to
The ratio ensurer that the banks do not expand then busmess mthout havlng
1. C A L
1,
~ k I capital
r
+ ~ i e Il
r capital / Risk weighted assets
Yon-PerfwmWg Assets W ( N P W T h e are the as&
that are OubhW to return
pkSZ@d WOT
mteccst in the near €blue Tlus results m huge l o s w to a bank Thus a bank
H a bw pmfd but at thc same t m e low NPA is preferable to the one hawng lugher profits wth
W ~ h a N p ~ ( a a i&
p Durga, 2011). The net non-Perfonmog assets to loan (advance) ratlo 1s used
r mmsmre of the overall quality of tbe bank loan Net NPA's are calculated by ratucrng
mklive balance of provisions outstandmg at a penod from gross NPAs H~gherraho reflects
.
u inaxnmy of loans. NPAR = Net non perfommg assets / Loans gven
722
The sumrnary of descriptive statisttcs of the study variables are presented in the table 3. All
the b c i a l indicators are increased during post-mger paid
The over all fnancial performance of bank mergess is presented in the graphl. The average
financial performance of inerged banks in terms of CDR, CAR, NPA, and RoA were increased by
34% after the mergers. The pmt and pre merger mean values of these ratios were CDR 84.37 >
62.49,CAR 14.19, 11.71,NPA1.17~2.43a~RoA1.10~0.98respedivelyasshowningraphl.
123
V d f NO1. January
easing impact of magers was observed on
commercial banks as shown in table no 7.
el. Hence, the bank mergers were able to
- March 2013
contributed towards RoA durlng the pre-merga per~odonly because the entire SPA and Credits of
target banks are taken over by the bidder banks.
Conclusions
This paper investigates the impact of mergers on the fmancial perfomxacc of the Indian
Scheduled Commercial Banks d u r i i the third merger wave pmad from 2001 to 20 10. By applying
key financial ratios, it examines Credit Deposit Ratio, Capitat Adequaq Ratio, N o n - P a f o m
Assets Ratio, and Return on Assets of merged banks over the study period The findings of the
study show that the o v a all average finawial performance increased by 34% after the merger.
The results of regression inferred that the selected fmancial indicators cmm'buted towards RoA
during the pre-merger period only because the entire NPA and Credits of target banks are taken
over by the bidder banks.
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