Efficiency and Bank Merger in Singapore: A Joint Estimation of Non-Parametric, Parametric and Financial Ratios Analysis

Fadzlan Sufian (), Muhamed Zulkhibri Abdul Majid () and Razali Haron

MPRA Paper from University Library of Munich, Germany

Abstract: This paper provides event study window analysis of pre- and post-merger bank performance in Singapore by employing Financial Ratio Analysis and Data Envelopment Analysis (DEA) approach. The findings from financial ratio analysis suggests that the merger has not resulted in a higher profitability of Singaporean banking groups post-merger, which could be attributed to the higher costs incurred. However, the merger has resulted in higher Singaporean banking groups’ mean overall efficiency. In most cases, the acquiring banks mean overall efficiency improved (deteriorates) post-merger resulting from merger with a more (less) efficient bank. Further, Tobit regression analysis is employed to explain changes in the efficiencies with the finding shows that, more efficient banks tend to maintain higher degree of capitalization, post higher profits and incur higher overhead costs.

Keywords: Bank Mergers; Data Envelopment Analysis (DEA); Tobit Model; Financial Ratios; Singapore (search for similar items in EconPapers)
JEL-codes: G34 D24 G21 (search for similar items in EconPapers)
Date: 2007-09-01, Revised 2007-10-01
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