The Effect of Mergers and Acquisitions on Bank Efficiency: Evidence from Bank Consolidation in Egypt

Malak Reda ()
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Malak Reda: The Egyptian Center for Economic Studies

No 770, Working Papers from Economic Research Forum

Abstract: The paper examines the impact of mergers and acquisitions on the efficiency and profitability of Egyptian banks by using Data Envelopment Analysis (DEA) to measure managerial efficiency and by traditional financial measures to capture changes in profitability and financial performance. The study compares the results of two periods, (2000-2003) as the pre consolidation period and (2007-2010) as the post consolidation period. The assumption is that banking efficiency improved post mergers and acquisitions and the empirical investigation aimed at verifying the empirical validity of the proposed hypothesis. The results showed that despite the fact that consolidation had a positive effect on managerial efficiency, banks’ capitalization and risk management practices, the banks’ intermediation function and banks’ profitability remained weak. Policy makers should design a strategy that promotes the channeling of deposits to productive lending by further promoting small and medium size enterprise lending and designing new innovative lending instruments that are well suited to the Egyptian market needs.

Pages: 27
Date: 2013-09, Revised 2013-09
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Citations: View citations in EconPapers (3)

Published by The Economic Research Forum (ERF)

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