Mergers and Acquisitions and the Effect on Financial Performance of Commercial Banks in Kenya
Abstract
This study looked at the Pre and post mergers and acquisitions and financial performance of commercial banks in Kenya for the period 2000 to 2018. The specific objectives were to determine effects of: mergers and acquisitions on Capital adequacy on the financial performance of commercial banks in Kenya, mergers and acquisitions on Asset Quality on the financial performance of commercial banks in Kenya, effects of mergers and acquisitions on Earnings on the commercial banks in Kenya, effects of mergers and acquisitions on Liquidity on the commercial banks in Kenya, mergers and acquisitions on the Sensitivity to market risk of the commercial banks in Kenya. The study used a descriptive research, employing both the use of multiple regression analysis and test of equality of two means with target population of 16 banks that had been involved in a merger/acquisition for the period 2000 to 2018. Based on availability of data for five years before and five years after the merger, 5 banks were picked to form the sample. Secondary data was collected from the financial statements available on the banks’ websites and supplemented with macroeconomic data from the central bank of Kenya banking supervisory reports for the period under study. Data was analyzed using both descriptive and inferential statistics. The results showed that merged banked improved in ROA and liquidity but in the process they became more sensitive to market risk. The study concluded that mergers/acquisitions improved ROA and bank liquidity and that capital adequacy of the merged banks did not improve, nor did the asset quality, nor the earnings and that sensitivity to market risk greatly increased for the merged banks. The study recommended that for banks seeking to improve on ROA and Liquidity a merger/acquisition would be one of the options to consider.
Keywords: Pre-mergers, Post-mergers, Acquisitions, Financial, Performance, Commercial banks, Kenya.
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