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The Effect of Mergers and Acquisitions on Bank Performance in Egypt

Author

Listed:
  • Ahmed Mohamed Badreldin

    () (Faculty of Management Technology, The German University in Cairo)

  • Christian Kalhoefer

    () (Faculty of Business Administration, British University in Egypt)

Abstract

Recent 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.

Suggested Citation

  • Ahmed Mohamed Badreldin & Christian Kalhoefer, 2009. "The Effect of Mergers and Acquisitions on Bank Performance in Egypt," Working Papers 18, The German University in Cairo, Faculty of Management Technology.
  • Handle: RePEc:guc:wpaper:18
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    File URL: http://mgt.guc.edu.eg/wpapers/018badreldin_kalhoefer2009.pdf
    File Function: First version, 2009
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    References listed on IDEAS

    as
    1. Arphaphan Chavaltanpipat & Shady Kholdy & Ahmad Sohrabian, 1999. "The wealth effects of bank acquisitions," Applied Economics Letters, Taylor & Francis Journals, vol. 6(1), pages 5-11.
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    Cited by:

    1. Hassan Hassan & Ammar Jreisat, 2016. "Does Bank Efficiency Matter? A Case of Egypt," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 473-478.
    2. Han Bao, 2017. "Evaluation of Pre and Post Demerger-Merger Performance: Using ABN AMRO Bank as an Example," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(2), pages 196-204, February.
    3. Abbas, Qamar & Hunjra, Ahmed Imran & Azam, Rauf I & Ijaz, Muhammad Shahzad & Zahid, Maliha, 2014. "Financial performance of banks in Pakistan after Merger and Acquisition," MPRA Paper 60790, University Library of Munich, Germany.

    More about this item

    Keywords

    Mergers and Acquisitions; Egypt; Banks; ROE; Performance Measurement; Reforms; ROA;

    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

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