The impact of M&A on bank’s financial performance: Evidence from emerging economy

Abstract

The proliferation of bank M&A has been a global phenomenon. In many emerging economies, bank M&A has often been driven by policies for restructuring the banking industry in the hope of improving stability in the financial system. The Pakistan M&A market is relatively new and is characterized by several unique features. In this regards, our study aim is to examine the impact of pre and post M&A on the bank’s financial performance in Pakistan during the period (2004-2015). Our results reveal that liquidity, profitability and investment ratios of the banks are positively and significantly increased the performance after M&A. Nevertheless, the solvency ratios indicate negative effects which are mainly based on the fact that after undergoing M&A the acquiring bank has to deal with the greater amount of debt burden as compared to pre-M&A. In light of these results, this study suggests implications for both theory and practice and also recommends ideas for future research.