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2017 | OriginalPaper | Buchkapitel

Is the Acquirer More Efficient Than Target? An Empirical Study from Selected Bank Consolidation in India

verfasst von : M. Kollapuri

Erschienen in: Current Issues in Economics and Finance

Verlag: Springer Singapore

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Abstract

This paper tries to examine whether the acquirer banks are more efficient than the target banks in 16 consolidation deals in Indian banking sector during the period 1995–2013. We find that as far as technical efficiency is concerned, the hypothesis that the acquirer is more efficient than the target bank is supported in almost all the cases except for the deal between ICICI Bank and Bank of Madura in which Bank of Madura (target) was more efficient than ICICI bank (the acquirer). Finally, both the input and output models of overall efficiency are clearly showed that the acquirer is more efficient than the target, but it does not reflect in scale efficiency.

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Vorheriges Kapitel Productivity Performance of Indian Banks with FDI Contents

Nächstes Kapitel Foreign Exchange Rate and Agricultural Performances: A Time Series Exercise for India

Nur mit Berechtigung zugänglich

An empirical study from US reveals that the consolidation of the commercial banks reduces the financial distress of merged banks (Berger and Humphery 1993).

A firm that must have a point on its production possibilities curve or that joining of services that have a superior value is called product-mix efficiency. This differswith consumer tastes and preferences, regulation policies and innovative technologies of the firm.

Product method means that the banks are considered a service provider for customers and intermediate method is considered that banks have an intermediate position between borrowers and savers.

In spite of overall efficiency gain, has measured the usage of input to convert output. This is divided into two components pure technical efficiency and scale efficiency. Pure technical efficiency means that the banks convert its input to output in variable return to scale. Scale efficiency shows that the bank’s ability to produce at maximum.

Banking Regulation Act, 1949 is accessed from, https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/BANKI15122014.pdf on 16-05-2014.

SBI Act 1955 is accessed from, http://financialservices.gov.in/banking/SBIActandregulation.pdf on 16-05-2014.

Banking Commercial Act, 1970 is accessed from https://www.pnbindia.in/Upload/En/Banking%20Companies%20Act%201970.pdf on 16-05-2014.

During the period 1961–1991, there were 59 consolidation deals. Indian banking sector experienced more than 46 consolidation deals during the period of pre-nationalization (i.e.) from 1961 to 1968. During nationalization, there were 13 consolidation deals between 1969 and 1991.

The production approach considers that the banks are producers of services for customers such as several transaction facilities for account holders. Based on the approach, the number of bank accounts is measured as the suitable output variable for the analysis while the physical capital and the number of bank employees is considered as the input variables.

Variable return to scale tries to indicate which firm is working which return to scale. It may be increasing return to scale, decreasing return to scale, and constant return to scale (see the methodology part 3 for understanding).

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Titel: Is the Acquirer More Efficient Than Target? An Empirical Study from Selected Bank Consolidation in India
verfasst von: M. Kollapuri
Verlag: Springer Singapore
Buch: Current Issues in Economics and Finance
Print ISBN: 978-981-10-5809-7

Electronic ISBN: 978-981-10-5810-3

Copyright-Jahr: 2017
DOI: https://doi.org/10.1007/978-981-10-5810-3_10