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Non-Parametric Analysis of Efficiency Gains from Bank Mergers in India

Author

Listed:
  • Adrian R. Gourlay

    (Dept of Economics, Loughborough University)

  • Geetha Ravishankar

    (Dept of Economics, Loughborough University)

  • Tom Weyman-Jones

    (Dept of Economics, Loughborough University)

Abstract

This paper offers an insight into the effectiveness of economic policy reforms in the Indian Banking System by examining the efficiency benefits of mergers among Scheduled Commercial Banks in India over the post-reform period 1991-92 to 2004-05. It does this by using the methodology developed by Bogetoft and Wang (2005). We also provide a metric for judging the success or failure of a merger. Overall, we find that bank mergers in the post-reform period possessed Considerable potential efficiency gains stemming from harmony gains. Post-merger efficiency analysis of the merged bank with a control group of non-merging banks reveals an initial merger related efficiency advantage for the former that, while persistent, did not show a sustained increase this failing to provide merging banks with a competitive advantage vis-a-viz their non-merging counterparts.

Suggested Citation

  • Adrian R. Gourlay & Geetha Ravishankar & Tom Weyman-Jones, 2006. "Non-Parametric Analysis of Efficiency Gains from Bank Mergers in India," Discussion Paper Series 2006_18, Department of Economics, Loughborough University, revised Oct 2006.
    • Handle: RePEc:lbo:lbowps:2006_18
    as

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    References listed on IDEAS

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    Cited by:

    1. Madan Mohan Dutta & Suman Kumar Dawn, 2012. "Mergers and Acquisitions in Indian Banks after Liberalisation: An Analysis," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 3(1), pages 108-114, January.
    2. Samaresh Bardhan, 2013. "Profit Efficiency of Indian Commercial Banks in the Post-liberalisation Period: A Stochastic Frontier Approach," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 7(4), pages 391-415, November.
    3. Subhash C. Ray & Shilpa Sethia, 2022. "Nonparametric measurement of potential gains from mergers: an additive decomposition and application to Indian bank mergers," Journal of Productivity Analysis, Springer, vol. 57(2), pages 115-130, April.
    4. A. Uday Bhaskar & Kanika T. Bhal & Bijaya Mishra, 2012. "Strategic HR Integration and Proactive Communication during M&A: A Study of Indian Bank Mergers," Global Business Review, International Management Institute, vol. 13(3), pages 407-419, October.
    5. Neeraj Kumar & Satish Chandra Tiwari & Pooja Choudhary, 2019. "Mergers and efficiency gains: a case of Indian banks," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 9(9), pages 230-237, September.
    6. Angeliki Flokou & Vassilis Aletras & Dimitris Niakas, 2017. "Decomposition of potential efficiency gains from hospital mergers in Greece," Health Care Management Science, Springer, vol. 20(4), pages 467-484, December.
    7. Sunil Kumar, 2013. "Banking reforms and the evolution of cost efficiency in Indian public sector banks," Economic Change and Restructuring, Springer, vol. 46(2), pages 143-182, May.

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    More about this item

    Keywords

    Data Envelopment Analysis; Mergers; Banking; Intermediation Approach; Production Approach.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • 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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