IJABMSInternational Journal of Applied Business and Management Sciences
-250x365.JPG "International Journal of Applied Business and Management Sciences")
Peer Reviewed Journal
Peer Reviewed Journal
IMPACT OF MERGERS AND ACQUISITIONS ON THE PROFITABILITY AND STABILITY OF NEPALESE BANKS: A COMPARATIVE ANALYSIS
Purpose: This study evaluates the impact of mergers and acquisitions (M&As) on the performance of Nepalese banks, specifically focusing on the relationship between Return on Equity (ROE) and key financial determinants, including Earnings Per Share (EPS), Return on Investment (ROI), and the Price-to-Earnings (P/E) ratio. The aim is to assess how these variables influence the financial performance of banks following M&A activities.
Methods: A quantitative research design was employed, analyzing data from Prabhu Bank Limited and Kist Bank Limited over the period 2016/17 to 2022/23. The study utilized a purposive sampling technique, focusing on these banks due to their merger history. Secondary data collection was conducted, and multiple regression analysis was applied to determine the relationship between ROE and its determinants.
Findings: The results indicate a positive and significant correlation between EPS, ROI, and P/E ratio with ROE, emphasizing that effective management of these financial indicators contributes to enhanced bank performance post-merger. Specifically, the correlation values reveal that P/E ratio, EPS, and ROI are strongly associated with ROE, with coefficients of 0.85, 0.90, and 0.88, respectively. Regression analysis further confirms these findings, highlighting the significant impact of these variables on ROE. These results underscore the importance of strategic financial management, particularly in maintaining robust EPS, ROI, and P/E ratios, to boost the performance of Nepalese banks after mergers and acquisitions.
Conclusion: The study demonstrates that mergers and acquisitions contribute to better financial performance in Nepalese banks by improving key financial metrics. Understanding these relationships is crucial for policymakers, investors, and banking professionals as it provides insights that can guide decision-making during M&A processes, thereby enhancing shareholder value and market stability.
Novelty: This study provides a unique contribution to the limited empirical literature on M&As in Nepal’s banking sector, offering valuable insights into financial performance metrics post-merger.
Keywords: Mergers, acquisitions, banking, Return on Equity, Return on Investment.
Madan Kandel (2024). Impact of Mergers and Acquisitions on the Profitability and Stability of Nepalese Banks: A Comparative Analysis. International Journal of Applied Business and Management Sciences. 5(2), 111-125.
