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The Effect of Mergers and Acquisitions on Bank Performance in Egypt

Author

Listed:
  • Ahmed Mohamed Badreldin

    (Faculty of Management Technology, The German University in Cairo)

  • Christian Kalhoefer

    (Faculty of Business Administration, British University in Egypt)

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.

Suggested Citation

  • Ahmed Mohamed Badreldin & Christian Kalhoefer, 2009. "The Effect of Mergers and Acquisitions on Bank Performance in Egypt," Working Papers 18, The German University in Cairo, Faculty of Management Technology.
    • Handle: RePEc:guc:wpaper:18
    as

    Download full text from publisher

    File URL: http://mgt.guc.edu.eg/wpapers/018badreldin_kalhoefer2009.pdf
    File Function: First version, 2009
    Download Restriction: no
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    References listed on IDEAS

    as
    1. Christian Kalhoefer & Rania Salem, 2008. "Profitability Analysis in the Egyptian Banking Sector," Working Papers 7, The German University in Cairo, Faculty of Management Technology.
    2. Arphaphan Chavaltanpipat & Shady Kholdy & Ahmad Sohrabian, 1999. "The wealth effects of bank acquisitions," Applied Economics Letters, Taylor & Francis Journals, vol. 6(1), pages 5-11.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Hassan Hassan & Ammar Jreisat, 2016. "Does Bank Efficiency Matter? A Case of Egypt," International Journal of Economics and Financial Issues, Econjournals, vol. 6(2), pages 473-478.
    2. Ammar Jreisat & Hassan Hassan & Sriram Shankar, 2018. "Determinants of the Productivity Change for the Banking Sector in Egypt," Global Business Review, International Management Institute, vol. 19(2), pages 280-296, April.
    3. Ammar Jreisat & Hassan Hassan, 2016. "Banking efficiency in Egypt: an application of data envelopment," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 11(2), pages 101-119.
    4. Qamar Abbas & Rashid Saeed & Ehsan-Ul-Hassan & Muhammad Shahzad Ijaz, 2014. "Analysis of Pre and Post Merger and Acquisition Financial Performance of Banks in Pakistan," Information Management and Business Review, AMH International, vol. 6(4), pages 177-190.
    5. Budny Katarzyna & Krasodomska Joanna & Świetla Katarzyna, 2019. "Performance Changes Around Banks Mergers and Acquisitions: Evidence from Poland," Financial Sciences. Nauki o Finansach, Sciendo, vol. 24(2), pages 28-45, June.
    6. Hassan Ismail Hassan & Ammar Jreisat, 2016. "Cost Efficiency of the Egyptian Banking Sector: A Panel Data Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 861-871.
    7. Malak Reda, 2013. "The Effect of Mergers and Acquisitions on Bank Efficiency: Evidence from Bank Consolidation in Egypt," Working Papers 770, Economic Research Forum, revised Sep 2013.
    8. Han Bao, 2017. "Evaluation of Pre and Post Demerger-Merger Performance: Using ABN AMRO Bank as an Example," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(2), pages 196-204, February.
    9. Noha Farrag & Guenter Lang, 2012. "The Egyptian Banking Sector: Assessing Efficiency Using a Stochastic Frontier Cost Function," Working Papers 33, The German University in Cairo, Faculty of Management Technology.
    10. Abbas, Qamar & Hunjra, Ahmed Imran & Azam, Rauf I & Ijaz, Muhammad Shahzad & Zahid, Maliha, 2014. "Financial performance of banks in Pakistan after Merger and Acquisition," MPRA Paper 60790, University Library of Munich, Germany.

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    More about this item

    Keywords

    Mergers and Acquisitions; Egypt; Banks; ROE; Performance Measurement; Reforms; ROA;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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