Strategic Fit And Potential Gains Of Mergers And Acquisitions In Banking An Emerging Market Perspective

The concerted economic reform efforts of the Ethiopian government focusing on liberalization andrnderegulation may cause an industry shock that could trigger merger waves in the banking industry.rnThis research analyzes the potential gains and strategic fit from potential bank Mergers & Aquisitonsrnthat may arise due to the government’s reforms. An Input-oriented Data Envelopment Analysis withrnboth Constant Returns to Scale and Variable Returns to Scale model is adopted to analyze the potentialrngains. Intermediation approach is chosen for Input-Output selection. These are obtained from financialrnstatements of 17 Local banks and 4 Foreign banks for the period from 2013 to 2018. Bank size andrnOwnership structure are used as contextual variables. There are 1,204 and 1,103 potential mergersrnfrom which 96.34% and 65.91% of mergers show overall efficiency gains, 63.5% and 54% show purernefficiency gains, 94.6% and 82.14% show technical efficiency gains, 63.46% and 63.37% show scalernefficiency gains for Constant Returns to Scale and Variable Returns to Scale assumption respectively.rn46.33% of the mergers’ show scale efficiency gains indicating favorability for full mergers,rncontradicting other researchers. A total of 45 bootstrapped panel Tobit regressions with 50 replicationsrnfor each are applied to the results. Results show most efficiency gains come from technical efficiencyrngains which don’t necessitate full mergers. Only local private banks have slight efficiency gains byrnfull mergers. The paper pointed out bank sizes and ownership structures that offer strategic fit andrnefficiency gains in potential bank Mergers & Acquisitons in Ethiopia

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