The Effect of Mergers and Acquisitions on Bank Performance in Egypt
AbstractRecent economic reforms in Egypt have significantly improved its macroeconomic indicators and financial sector. Banks have witnessed significant merger and acquisition activity as a result of these reforms in attempts to privatize and strengthen the banking sector. This study measures the performance of Egyptian banks that have undergone mergers or acquisitions during the period 2002-2007. This is done by calculating their return on equity using the Basic ROE Scheme in order to determine the degree of success of banking reforms in strengthening and consolidating the Egyptian banking sector. Our findings indicate that not all banks that have undergone deals of mergers or acquisitions have shown significant improvements in performance and return on equity when compared to their performance before the deals. Furthermore, extensive analysis was performed yielding the same results. It was concluded that mergers and acquisitions have not had a clear effect on the profitability of banks in the Egyptian banking sector. They were only found to have minor positive effects on the credit risk position. These findings do not support the current process of financial consolidation and banking reforms observed in Egypt, and provide weak evidence to support their constructive role in improved bank profitability and economic restructure.
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Bibliographic InfoPaper provided by The German University in Cairo, Faculty of Management Technology in its series Working Papers with number 18.
Length: 17 pages
Date of creation: Oct 2009
Date of revision:
Mergers and Acquisitions; Egypt; Banks; ROE; Performance Measurement; Reforms; ROA;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-31 (All new papers)
- NEP-ARA-2009-10-31 (MENA - Middle East & North Africa)
- NEP-BAN-2009-10-31 (Banking)
- NEP-COM-2009-10-31 (Industrial Competition)
- NEP-CWA-2009-10-31 (Central & Western Asia)
- NEP-EFF-2009-10-31 (Efficiency & Productivity)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Arphaphan Chavaltanpipat & Shady Kholdy & Ahmad Sohrabian, 1999. "The wealth effects of bank acquisitions," Applied Economics Letters, Taylor and Francis Journals, vol. 6(1), pages 5-11.
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