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The Effect of Mergers and Acquisitions on Bank Performance in Egypt

Ahmed Mohamed Badreldin () and Christian Kalhoefer ()
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Ahmed Mohamed Badreldin: Faculty of Management Technology, The German University in Cairo
Christian Kalhoefer: Faculty of Business Administration, British University in Egypt

No 18, Working Papers from The German University in Cairo, Faculty of Management Technology

Abstract: Recent economic reforms in Egypt have significantly improved its macroeconomic indicators and financial sector. Banks have witnessed significant merger and acquisition activity as a result of these reforms in attempts to privatize and strengthen the banking sector. This study measures the performance of Egyptian banks that have undergone mergers or acquisitions during the period 2002-2007. This is done by calculating their return on equity using the Basic ROE Scheme in order to determine the degree of success of banking reforms in strengthening and consolidating the Egyptian banking sector. Our findings indicate that not all banks that have undergone deals of mergers or acquisitions have shown significant improvements in performance and return on equity when compared to their performance before the deals. Furthermore, extensive analysis was performed yielding the same results. It was concluded that mergers and acquisitions have not had a clear effect on the profitability of banks in the Egyptian banking sector. They were only found to have minor positive effects on the credit risk position. These findings do not support the current process of financial consolidation and banking reforms observed in Egypt, and provide weak evidence to support their constructive role in improved bank profitability and economic restructure.

Keywords: Mergers and Acquisitions; Egypt; Banks; ROE; Performance Measurement; Reforms; ROA (search for similar items in EconPapers)
JEL-codes: G21 G34 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2009-10
New Economics Papers: this item is included in nep-ara, nep-ban, nep-com, nep-cwa and nep-eff
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http://mgt.guc.edu.eg/wpapers/018badreldin_kalhoefer2009.pdf First version, 2009 (application/pdf)

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