Mergers & Acquisitions and Efficiency of Financial Intermediation in Nigeria Banks: An Empirical Analysis

Abstract

The value gains that alleged to accrue to the large and growing wave of merger and acquisition activity have not been verified. Thus leading the research community in quandary on whether the industry has followed a path of massive restructuring on a misguided belief of value gains or whether the financial regulators and operators are lying to the public and shareholders about the effects of their activity on shareholders value and banking performance. It is important to address this issue by reconciling data with empirical reality of continued merger and acquisition activity. This paper fills the gap by investigating the effects of mergers and acquisitions on the efficiency of financial intermediation in the Nigerian banking industry. This is carried out by estimating a model that incorporates some key financial variables in a model that regress interest rates on these financial variables. Two models are estimated: one for the lending activity and the other is for the deposit activities. The model for lending activity has interest rate on loan as the dependent variable and deposit rate represents the dependent variable in the deposit model. The study found evidence to support the thesis that the consolidation programme-induced mergers and acquisitions in the banking industry had improved competitiveness and efficiency of the borrowing and lending operations of the Nigerian banking industry.