Understanding the aftermath of banks merger: analyzing price effects on public sector banks since the COVID-19 pandemic
Abstract
Purpose
The current study immerses in the realm of bank mergers among prominent PSBs in India, focusing on the financial performance of six recently merged PSBs entities. Amidst the global impact of the COVID-19 pandemic on economies, the study aims to uncover the efficiency of these PSBs in navigating this unprecedented crisis.
Design/methodology/approach
The evaluation encompasses panel data on an annual basis spanning from 2020 to 2023. To assess the overall efficiency of merged PSBs, the advanced statistical technique like one-step system generalized method of moments has been applied to estimate its efficiency.
Findings
The study findings affirm that PSB mergers have bolstered financial metrics and efficiency. Enhanced return on equity (ROA) and net profit margin (NPM) signify improved profitability and efficiency. The consolidation also facilitates better asset management and utilization. Moreover, merged entities benefit from economies of scale, cost efficiencies, risk diversification, technological investments, and overall performance improvements.
Practical implications
The study's policy suggestions stress ongoing consolidation efforts to boost banking sector resilience, advocating for improved efficiency, governance, and asset quality management. These steps are crucial for successful bank mergers and fostering a robust, competitive banking landscape in India.
Originality/value
This study is a novel attempt to analyze Indian bank profitability and efficiency post PSB mergers amid COVID-19 pandemic. In a developing country like India, especially in PSBs has experienced significant structural changes over the previous 7 years just before pandemic, such a study necessitates a prompt empirical investigation.
Keywords
Acknowledgements
We are grateful to Don T. Johnson (Editor), Tao-Hsien Dolly King (Guest Editor) and one anonymous referee for valuable suggestions. We also thank Competitive Commission of India and the audience of presentations at the 9th National Conference on Economics of Competition Law at India Habitat Centre, New Delhi for valuable comments.
Funding: Authors affirm that they have no financial or non-financial interest in the topics or subject matters covered in this manuscript, nor do they have any affiliations with or involvement in any organizations or entities that may have such an interest.
Citation
Kumar, S. and Verma, A. (2024), "Understanding the aftermath of banks merger: analyzing price effects on public sector banks since the COVID-19 pandemic", Managerial Finance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/MF-05-2024-0351
Publisher
:Emerald Publishing Limited
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