Effects of mergers & acquisitions on financial performance of USA acquiror banks

Abstract

This study is testing the effects of mergers & acquisitions in banking sector and provides insights about their role on financial profitability of USA bidder banks. In this paper five financial ratios are used for analysis. The ratios are return on asset(ROA) ; return on equity (ROE); earning per share (EPS) ; capital ratio (CR); liabilities/ assets ratio(L/A). Thirty banks are selected as sample for the analysis which get into mergers from 2006 to 2012. Two years pre-merger and two years post-merger data points are taken for all the thirty banks and the average are compared. We first uses accounting formulas to calculate all financial ratios and then uses R studio to complete the Wilcoxon signed rang test required for testing pre-and-post merger financial performance of banks. At 5% level of significance findings show that mergers & acquisitions have no significant impact on financial performance of acquirer banks in USA during the studied period and often they are even performing worst.