Does positive relationship exist between bank mergers and asset turnover? Empirical evidence from Nigeria
International Journal of Ethics and Systems
ISSN: 2514-9369
Article publication date: 3 January 2019
Issue publication date: 21 January 2019
Abstract
Purpose
This study aims to examine the nature of relationship that exists between merger and acquisition (M&A) and banks’ asset turnover (AT) following M&As that took place during the 2004 and 2008 banking sector reforms.
Design/methodology/approach
Considering the fact that this study is empirical, the authors adopted the quantitative research method relying on financial industry data. Being a matched-sample comparison, the study evaluated whether the merged banks outperformed the stand-alone banks as a result of their involvement in M&As. Using data extracted from the annual financial reports of the banks, mean AT ratios were computed. Chow test for structural break, paired sample and independent sample t-tests were performed on the mean AT ratios to gauge the impact of M&A.
Findings
The findings suggest that there is no positive relationship between M&A and banks’ AT as either the AT ratios of the banks deteriorated or at best, did not improve significantly. Furthermore, the evidence suggests that the stand-alone banks outperformed the merged banks following M&As in Nigeria.
Practical implications
The major practical implication of this empirical study is that M&A has not been able to solve the fundamental problems of banks in Nigeria. Apart from improving their liquidity constraints, the unresolved problems of banks in Nigeria include poor corporate governance compliance, poor credit risk management policy and ineffective allocation of capital to businesses.
Originality/value
This study supports the Keynesian argument for effective regulation supervision and control of the economy in general and financial institutions.
Keywords
Citation
Yusuf, H. and Raimi, L. (2019), "Does positive relationship exist between bank mergers and asset turnover? Empirical evidence from Nigeria", International Journal of Ethics and Systems, Vol. 35 No. 1, pp. 133-147. https://doi.org/10.1108/IJOES-10-2018-0147
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited