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Efficiency in pre-merger and post-merger non-bank financial institutions

  • Andrew C. Worthington

    (School of Economics and Finance, Queensland University of Technology, Brisbane, QLD, Australia)

A two-part process is employed to analyse the role of efficiency in merger and acquisition (M&A) activity in Australian credit unions during the period 1993-1997. The measures of efficiency are derived using the non-parametric technique of data envelopment analysis. The first part uses panel data in the probit model to relate pure technical efficiency, along with other managerial, regulatory and financial factors, to the probability of merger activity, either as an acquiring or acquired entity. The results indicate that loan portfolio diversification, management ability, earnings and asset size are a significant influence on the probability of acquisition, though the primary determinant of being acquired is smaller asset size. The second part uses a tobit model adapted to a panel framework to analyse post-merger efficiency. Mergers appear to have improved both pure technical efficiency and scale efficiency in the credit union industry. Copyright © 2001 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1033
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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 22 (2001)
Issue (Month): 8 ()
Pages: 439-452

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Handle: RePEc:wly:mgtdec:v:22:y:2001:i:8:p:439-452
Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Miller, Stephen M. & Noulas, Athanasios G., 1996. "The technical efficiency of large bank production," Journal of Banking & Finance, Elsevier, vol. 20(3), pages 495-509, April.
  2. Ferrier, Gary D. & Lovell, C. A. Knox, 1990. "Measuring cost efficiency in banking : Econometric and linear programming evidence," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 229-245.
  3. Fried, Harold O. & Knox Lovell, C. A. & Eeckaut, Philippe Vanden, 1993. "Evaluating the performance of US credit unions," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 251-265, April.
  4. Aly, Hassan Y, et al, 1990. "Technical, Scale, and Allocative Efficiencies in U.S. Banking: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 211-18, May.
  5. Berg, Sigbjorn Atle & Forsund, Finn R. & Hjalmarsson, Lennart & Suominen, Matti, 1993. "Banking efficiency in the Nordic countries," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 371-388, April.
  6. Shaffer, Sherrill, 1993. "Can megamergers improve bank efficiency?," Journal of Banking & Finance, Elsevier, vol. 17(2-3), pages 423-436, April.
  7. Fried, Harold O. & Lovell, C. A. Knox & Yaisawarng, Suthathip, 1999. "The impact of mergers on credit union service provision," Journal of Banking & Finance, Elsevier, vol. 23(2-4), pages 367-386, February.
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