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Merger and Acquisitions in South African Banking: A Network DEA Model

Author

Listed:
  • Peter Wanke

    () (COPPEAD Graduate Business School, Federal University of Rio de Janeiro, Rio de Janeiro)

  • Andrew Maredza

    () (School of Economics and Decision Science, North West University, South Africa)

  • Rangan Gupta

    () (Department of Economics, University of Pretoria, Pretoria)

Abstract

Banking in South Africa is known for its small number of companies that operate as an oligopoly. This paper presents a strategic fit assessment of mergers and acquisitions (M and A) in South African banks. A network DEA (Data Envelopment Analysis) approach is adopted to compute the impact of contextual variables on several types of efficiency scores of the resulting virtual merged banks: global (merger), technical (learning), harmony (scope), and scale (size) efficiencies. The impact of contextual variables related to the origin of the bank and its type is tested by means of a set of several robust regressions to handle dependent variables bounded in 0 and 1: Tobit, Simplex, and Beta. The results reveal that bank type and origin impact virtual efficiency levels. However, the findings also show that harmony and scale effects are negligible due to the oligopolistic structure of banking in South Africa.

Suggested Citation

  • Peter Wanke & Andrew Maredza & Rangan Gupta, 2016. "Merger and Acquisitions in South African Banking: A Network DEA Model," Working Papers 201665, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201665
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    Keywords

    Banks; South Africa; Merger and Acquisitions; Network; DEA; Robust Regression Analysis;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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