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Impact of bank mergers on shareholders’ wealth

Author

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  • Odero Naor Juma

    (Department of Business Management, Masinde Muliro University,of Science and Technology, Kenya)

  • Peter T. Wawire

    (Department of Business Management, Masinde Muliro University,of Science and Technology, Kenya)

  • Prof. John Byaruhanga

    (Department of Social Science and Education, Masinde Muliro,University of Science and Technology, Kenya)

  • Ochieng Okaka

    (Department of Social Science and Education, Masinde Muliro,University of Science and Technology, Kenya)

  • Odhiambo Odera

    (Department of Social Science and Education, Masinde Muliro,University of Science and Technology, Kenya)

Abstract

Mergers and acquisitions (M&As) perform a vital role in corporate finance in enabling firms achieve varied objectives and financial strategies. This study sought to comprehend the impacts that previous bank mergers have had on the shareholders’ wealth. The study location was in Kenya and it adopted the descriptive survey and correlation design in which the success of mergers was measured based on the objective oriented model using the annual accounts. The study computed the return on assets (ROA), return on equity (ROE) and the efficiency ratio (EFF) as indicators of shareholder value. The results of the commercial banks were analysed for a five-year period (2006-2010). The study reveals that mergers significantly influence shareholder value with banks that have undertaken mergers creating more value than those that have not. Such banks were ascertained to have posted better results than the overall sector.

Suggested Citation

  • Odero Naor Juma & Peter T. Wawire & Prof. John Byaruhanga & Ochieng Okaka & Odhiambo Odera, 2012. "Impact of bank mergers on shareholders’ wealth," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 2(6), pages 162-177, November.
    • Handle: RePEc:mir:mirbus:v:2:y:2012:i:6:p:162-177
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    References listed on IDEAS

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    1. Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin & Zulehner, Christine, 2003. "The effects of mergers: an international comparison," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 625-653, May.
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    3. Hitt, Michael A. & Harrison, Jeffrey S. & Ireland, R. Duane, 2001. "Mergers and Acquisitions: A Guide to Creating Value for Stakeholders," OUP Catalogue, Oxford University Press, number 9780195112856.
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    5. Gary Gorton & Matthias Kahl & Richard J. Rosen, 2009. "Eat or Be Eaten: A Theory of Mergers and Firm Size," Journal of Finance, American Finance Association, vol. 64(3), pages 1291-1344, June.
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    Cited by:

    1. Manoj Kumar Bhatta, 2016. "Effect of Bank Merger on the Shareholders Wealth and Post-Merger Situation of Nepalese Banking Industry," Information Management and Business Review, AMH International, vol. 8(4), pages 41-51.

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