Effect of Mergers and Acquisitions on Market Concentration and Interest Spread
AbstractThis study investigates the relationship of mergers & acquisitions with the interest spread of the banking industry in Pakistan. To assess whether the merger of Pakistani banks were a success or otherwise, profitability, liquidity ratios, and net interest spread are computed which are considered essential to judge the financial performance of any bank. Data is taken for the period of 1997-2010 and this data have been used to calculate the interest spread and market concentration. Market Concentration is calculated by using Herfindahl-Hirschman Index or HHI. Findings show that the profitability and net interest spread of two merged banks declines as a result of mergers. It is also revealed that Concentration of the banking industry shows a rising trend during 2008 and 2009 after mergers occurred during 2007 as a result of merger. However, it shows the level that almost approaches the threshold i.e. 1000. One or two more mergers can push up threshold level of HH index. It means that it is the right time for banking industry of Pakistan to be reviewed by any antitrust authority to maintain the optimum level of competition.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 37311.
Date of creation: 2011
Date of revision:
Publication status: Published in Journal of Economics and Behavioral Studies No. 3.3(2011): pp. 190-197
Mergers & Acquisitions; Market Concentration; Banking industry; Interest Spread; and Profitability;
Find related papers by JEL classification:
- G1 - Financial Economics - - General Financial Markets
- A1 - General Economics and Teaching - - General Economics
- M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics
- G0 - Financial Economics - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-17 (All new papers)
- NEP-COM-2012-04-17 (Industrial Competition)
- NEP-IND-2012-04-17 (Industrial Organization)
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