Pre and Post–Merger Financial Performance Analysis of Commercial Banks in Nepal

Authors

  • Pitri Raj Adhikari Tribhuvan University

DOI:

https://doi.org/10.3126/irjms.v8i1.60703

Keywords:

Merger, commercial banks, financial performance, ratio analysis

Abstract

Purpose: This study attempts to examine the effect of merger on the financial performance of Nepalese commercial banks.

Methodology: This paper employs a descriptive and causal comparative research design to examine the financial performance of commercial banks involved in six merger deals as of mid-July 2022, with a sample of four merger deals completed before mid-July 2018. Mean, standard deviation, paired sample t-test, Pearson correlation, regression analysis, and the VIF test, are utilized for data analysis. Financial performance is evaluated using nine key ratios (EPS, NWPS, P/E ratio, CD ratio, CAR, NPL ratio, ROA, ROE, and NPM). Secondary data covering six years (2010 to 2019), excluding the specific merging year, are analyzed.

Findings: The analysis of pre- and post-merger financial performance in the sample commercial banks revealed statistically significant differences in EPS, NWPS, ROA, and NPM. Positive correlations were observed between the pre- and post-merger periods for EPS, NWPS, CD ratio, CAR, NPL ratio, ROA, ROE, and NPM, excluding the P/E ratio. The merger proved beneficial for Nepalese commercial banks, leading to improved profitability in terms of EPS, ROA, and NPM in the post-merger phase. However, factors like CD ratio, CAR, and NPL ratio, regulated by the NRB, showed no significant changes post-merger. Although banks experienced increased P/E ratio and ROE, the impact was deemed insignificant. Notably, CAR had the most significant impact on both pre- and post-merger ROA.

Implication: The results derived from the study are relevant to managers for future merger decisions and can be used for the selection of a suitable partner for future merger activities.

Value: It contributes to a better understanding of the overall merger scenario in Nepalese banking sector, as well as the relationship between certain restrictions and merger.

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Author Biography

Pitri Raj Adhikari, Tribhuvan University

Assistant Professor

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Published

2023-12-31

How to Cite

Adhikari, P. R. (2023). Pre and Post–Merger Financial Performance Analysis of Commercial Banks in Nepal. The International Research Journal of Management Science, 8(1), 95–110. https://doi.org/10.3126/irjms.v8i1.60703

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Section

Articles