Impact of Mergers and Acquisition on Financial Performance of Commercial Banks in Kenya (A Survey of Commercial Banks in Kenya)
Keywords:
: Capital, Asset, Management, Earnings and Li-quidity, Mergers and Acquisitions, Financial performance.Abstract
The aim of this study was to analyze the impact of Mergers and acquisition on financial performance of commercial banks, a comparative study of pre and post-merger financial metrics. The study was guided by three specific research questions: What are the effect of mergers on liquidity of commercial banks; What is the market share of commercial banks after merger? What are the risk diversification on financial performance after merger? The descriptive research design was employed for this study and the target population for comprised of banks in Kenya that have undergone mergers and acquisitions (M&A). These banks form the foundation of the research focus, as their experiences provided valuable insights into the impact of M&A on financial performance. The chosen data collection tool for this study is a questionnaire, a widely adopted instrument aligning seamlessly with the research objectives and the unique characteristics of the target population. Descriptive statistical measures, including mean and standard deviation, was employed to provide a comprehensive overview of the central tendencies and variability within the data. Correlation analysis was conducted to explore the relationships between different variables. Multiple regression analysis was employed to assess the impact of mergers on financial performance. The paired sample t-test was employed to evaluate the impact of a merger on three vital financial indicators: liquidity, market share, and risk diversification. The statistical analysis revealed significant improvements in each domain after the merger, shedding light on the tangible effects of the consolidation. Starting with the Liquidity Assessment, the pre-merger mean liquidity score of 2.914 (SD = 0.3079) saw a notable increase to 3.937 (SD = 0.3059) post-merger. The paired t-test yielded a highly significant result (t = -13.022, df = 34, p = 0.000), indicating a substantial improvement in liquidity. This outcome emphasizes that the merger positively impacted the organization's ability to meet short-term obligations and manage cash flows more effectively. Moving on to the Market Share Evaluation, the pre-merger mean market share of 2.994 (SD = 0.3514) experienced a remarkable surge to 3.977 (SD = 0.2901) post-merger. The paired t-test result (t = -14.392, df = 34, p = 0.000) highlighted a significant and consistent improvement in market share. This suggests that the merger had a positive and meaningful influence on the organization's competitive standing within the industry. In terms of Risk Diversification Analysis, the pre-merger mean risk diversification score of 3.006 (SD = 0.4014) witnessed a robust advancement to 3.977 (SD = 0.3623) post-merger. The paired t-test (t = -9.574, df = 34, p = 0.000) indicated a significant enhancement in risk diversification, emphasizing the positive impact of the merger on the organization's ability to manage diverse risks effectively.
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