The Impact of Mergers and Acquisitions on Efficiency and Performance in Banking: Empirical Evidence from Croatia

Katerina Fotova Čiković (), Mila Mitreva () and Damira Keček ()
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Katerina Fotova Čiković: University North, Koprivnica
Mila Mitreva: Goce Delcev University
Damira Keček: University North, Koprivnica

A chapter in Navigating Economic Uncertainty - Vol. 1, 2025, pp 199-222 from Springer

Abstract: Abstract The research field of the impact and effects of M&A in the banking sector is one of the most controversial fields with very inconsistent findings. Such research would provide a developing Southeastern European country with new insights and valuable feedback for potential bank investors, bank management, M&A analysts, academic members, and regulatory and government bodies. The main objective of this two-stage study is to evaluate the impact M&A transactions had on banks’ efficiencies in Croatia. The main hypothesis argues that larger banks are more efficient than small-sized banks and, thus, consolidation of the small-sized banks would bring higher efficiency to each individual bank involved in the M&A process and the entire Croatian banking market, equally. Moreover, another goal of this study is to present the DEA methodology and its dynamic window technique, along with its strengths, limitations, and its lesser-known application in the evaluation of banking M&A transactions. In the first stage, the BCC Data Envelopment Analysis (DEA) window technique model was implemented to assess the relative efficiency of both the entire Croatian banking sector and each individual bank from the sample of 20 banks in the period 2011–2020, with two inputs (interest expenses and noninterest expenses) and two outputs (interest revenues and noninterest revenues). In the second stage, a closer analysis on the impact and efficiency gains or losses from a few case studies of merger and acquisition (M&A) transactions occurred in the Croatian banking sector during the observed period was conducted. The obtained results reveal new insights in the M&A field and indicate that the observed M&A transactions in Croatia’s banking sector led to enhanced efficiency in the merged banks. Moreover, the consolidation of the Croatian banking sector has increased the relative efficiency of the overall banking sector, except for the last analyzed year of 2020.

Keywords: DEA; Data envelopment analysis; Banking sector; Bank efficiency; Mergers and acquisitions; Croatia; Window analysis (search for similar items in EconPapers)
JEL-codes: G21 G34 N24 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-73506-6_12

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DOI: 10.1007/978-3-031-73506-6_12

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