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The Effect of Mergers and Acquisitions on Bank Efficiency: Evidence from Bank Consolidation in Egypt

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  • Malak Reda

    (The Egyptian Center for Economic Studies)

Abstract

The paper examines the impact of mergers and acquisitions on the efficiency and profitability of Egyptian banks by using Data Envelopment Analysis (DEA) to measure managerial efficiency and by traditional financial measures to capture changes in profitability and financial performance. The study compares the results of two periods, (2000-2003) as the pre consolidation period and (2007-2010) as the post consolidation period. The assumption is that banking efficiency improved post mergers and acquisitions and the empirical investigation aimed at verifying the empirical validity of the proposed hypothesis. The results showed that despite the fact that consolidation had a positive effect on managerial efficiency, banks’ capitalization and risk management practices, the banks’ intermediation function and banks’ profitability remained weak. Policy makers should design a strategy that promotes the channeling of deposits to productive lending by further promoting small and medium size enterprise lending and designing new innovative lending instruments that are well suited to the Egyptian market needs.

Suggested Citation

  • Malak Reda, 2013. "The Effect of Mergers and Acquisitions on Bank Efficiency: Evidence from Bank Consolidation in Egypt," Working Papers 770, Economic Research Forum, revised Sep 2013.
    • Handle: RePEc:erg:wpaper:770
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    References listed on IDEAS

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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. Ammar Jreisat & Hassan Hassan & Sriram Shankar, 2018. "Determinants of the Productivity Change for the Banking Sector in Egypt," Global Business Review, International Management Institute, vol. 19(2), pages 280-296, April.
    3. Ammar Jreisat & Hassan Hassan, 2016. "Banking efficiency in Egypt: an application of data envelopment," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 11(2), pages 101-119.

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