Bank Consolidation and Improvement of Shareholder Value: An Empirical Evaluation of Return on Capital Employed Following Bank Mergers in Nigeria
Professor Aminu Diyo Sheidu, Hassan Yusuf

The effects of bank mergers and acquisitions (M & as) on shareholders’ wealth has long been of interest to researchers in the developed economies. However, in emerging economies, especially Africa, similar studies have been very few and the findings are varied and do not point towards one direction. Against this background, this study investigated the post-merger Return on Capital Employed (ROCE) of banks following the 2004/2005 industry-wide mergers and acquisitions in Nigeria. Data were obtained from the audited annual reports of the banks from which mean ROCE ratios of the banks were computed before and after mergers. Paired Sample t-tests and Independent Sample t-tests were performed on the ROCE for the target and control groups. Contrary to the popular findings from most earlier studies undertaken in the developed world, which found positive relationships between bank mergers and shareholders’ value, the findings of this study are more consistent with the less popular opinion that bank mergers at best do not enhance shareholder value, and in some cases, may even diminish it. The study therefore recommends that subsequent reforms of the banking industry should be geared toward creating enabling environment that will usher in banking efficiency which will in the long-run secure and increasingly enhance profitability and shareholder values of the banks.

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