POST-CONSOLIDATION EFFECT OF MERGERS AND ACQUISITIONS ON NIGERIA DEPOSIT MONEY BANK
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Prior to the consolidation exercise in 2005, the banking industry was filled with a large number of weak, small banks that
had low capital bases and were not performing their duties as the main financial intermediaries in the economy. The
consolidation exercise which was spearheaded by the CBN governor, Charles Soludo raised the recapitalization of deposit
money banks to a minimum of N25 billion naira by December 31, 2005 with mergers and acquisitions (M&As) as one of
the strategies the banks could adopt to meet this requirement. By the end of the consolidation exercise, the number of banks
had reduced from 89 to 25 while the capital base and reliability of the banks that survived increased. This study was carried
out to find out the challenges faced by the banks during and after the exercise, the performance of these banks postconsolidation
and if mergers and acquisitions has in anyway affected the banks and if so, in what ways. The panel data
regression technique was used in the analysis and we found that M&As affect banks’ performance but does not affect
banks’ cost of equity capital. We recommend that the management of Nigerian banks has to be efficient and effective in
allocating available resources so as to stay relevant in the now competitive banking industry so as to enjoy the full benefits
that come with mergers and acquisitions.
Keywords
HF Commerce, HG Finance