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Assessing the impact of mergers and acquisitions on bank profit efficiency: empirical evidence from Malaysia

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  • Fadzlan Sufian
Abstract
The present paper examines the impact of forced mergers and acquisitions on the profit efficiency of the Malaysian banking sector. The analysis consists of three stages. Firstly, by using the data envelopment analysis (DEA) approach, we calculate the profit, profit pure technical efficiency, and profit scale efficiency of individual banks during the period 1997-2003. Secondly, we examine the changes in the efficiency of the Malaysian banking sector during the pre- and post-merger periods by using a series of parametric and non-parametric univariate tests. Finally, we perform a panel regression analysis to investigate the relationship between the efficiency of the Malaysian banks while controlling for the potential effects of the contextual variables. We find that the target banks have been relatively more profit efficient in six out of the seven merger cases analysed. The empirical findings suggest that the profit efficiency of the acquiring banks improves (deteriorates) from the merger with a more (less) efficient bank in six out of the seven merger cases analysed.

Suggested Citation

  • Fadzlan Sufian, 2009. "Assessing the impact of mergers and acquisitions on bank profit efficiency: empirical evidence from Malaysia," International Journal of Decision Sciences, Risk and Management, Inderscience Enterprises Ltd, vol. 1(3/4), pages 258-285.
    • Handle: RePEc:ids:ijdsrm:v:1:y:2009:i:3/4:p:258-285
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    Citations

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    Cited by:

    1. Fadzlan Sufian & Fakarudin Kamarudin, 2013. "Efficiency of the Bangladesh Banking Sector: Evidence from the Profit Function," Jindal Journal of Business Research, , vol. 2(1), pages 43-57, June.
    2. Alsaleh, Mohd & Abdul-Rahim, A.S., 2018. "Determinants of cost efficiency of bioenergy industry: Evidence from EU28 countries," Renewable Energy, Elsevier, vol. 127(C), pages 746-762.
    3. Fakarudin Kamarudin & Bany Ariffin Amin Nordin & Junaina Muhammad & Mohamad Ali Abdul Hamid, 2014. "Cost, Revenue and Profit Efficiency of Islamic and Conventional Banking Sector: Empirical Evidence from Gulf Cooperative Council Countries," Global Business Review, International Management Institute, vol. 15(1), pages 1-24, March.
    4. Mohd Alsaleh & A.S. Abdul-Rahim & H.O. Mohd-Shahwahid & Lee Chin & Fakarudin Kamarudin, 2016. "An Empirical Analysis for Technical Efficiency of Bioenergy Industry in EU28 Region Based on Data Envelopment Analysis Method," International Journal of Energy Economics and Policy, Econjournals, vol. 6(2), pages 290-304.
    5. Fadzlan Sufian & Junaina Muhamad & A.N. Bany-Ariffin & M.H. Yahya & Fakarudin Kamarudin, 2012. "Assessing the Effect of Mergers and Acquisitions on Revenue Efficiency: Evidence from Malaysian Banking Sector," Vision, , vol. 16(1), pages 1-11, March.
    6. Priyonggo Suseno & Omar Bamahriz, 2017. "Examining the impact of bank’s risks to Islamic banks’ profitability," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 9(2), pages 125-137, April.
    7. Alsaleh, Mohd & Abdul-Rahim, A.S. & Mohd-Shahwahid, H.O., 2017. "Determinants of technical efficiency in the bioenergy industry in the EU28 region," Renewable and Sustainable Energy Reviews, Elsevier, vol. 78(C), pages 1331-1349.

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