Bank mergers and acquisitions and the post-merger and acquisition performance of combined banks: evidence from Sub-Saharan Africa

Figures & data

Table 1. Yearly breakdown of bank M&A between 2004 and 2017 in the selected SSA countries.

	Forced		Voluntary		Full sample
Years	No of mergers	% of total	No of mergers	% of total	No of mergers	% of total
2004	1	0.08	1	0.10	2	0.09
2005	4	0.31	1	0.30	5	0.22
2006	4	0.31	0	0.40	4	0.17
2007	1	0.08	0	0.10	1	0.04
2008	1	0.08	0	0.00	1	0.04
2009	0	0.00	3	0.00	3	0.13
2010	0	0.00	0	0.00	0	0.00
2011	0	0.00	2	0.00	2	0.09
2012	0	0.00	1	0.00	1	0.04
2013	0	0.00	1	0.00	1	0.04
2014	0	0.00	0	0.00	0	0.00
2015	0	0.00	0	0.00	0	0.00
2016	0	0.00	0	0.00	0	0.00
2017	2	0.15	1	0.10	3	0.13
Total	13	100	10	100	23	100

Compiled by the author based on information on the websites of central banks of selected SSA and participating bank’s websites.

Table 2. Summary of variables employed.

Symbols	Names	Measurements	Expected Signs	Sources
ROA	Return on assets	Profit before taxation and extraordinary items as a percentage of total assets		BankScope
ROE	Return on Equity	Shareholders fund as a percentage of total assets		BankScope
NIM	Net interest margin	Net interest income as a percentage of total assets.		BankScope
CON	Market Concentration	Herfindal Hirschman Index Approach	±	BankScope
CI	Bank cost to income	Total operating expenses to total operating income. It is a measure of bank efficiency and an indicator of management quality.	−	BankScope
GLTA	Gross loans to total assets	Total loans scaled over total assets. It is a measure of bank risk-taking behavior.	±	BankScope
BSIZE	Bank Size	Natural log of total assets	±	BankScope
CTA	Bank cost to total assets	Total operating expenses to total assets. This ratio is also a measure of bank efficiency.	−	BankScope
GLD	Gross loans to deposit	Total loans scaled over total deposits. It is a measure of bank risk-taking behavior.	±	BankScope
ZSCORE	Bank stability	(Capital ratio + ROA)/ᵹROA	±	BankScope
GDPG	Gross Domestic Product Growth	Changes in GDP	±	World Development Indicators
INFL	Inflation	Consumer Price Index.	±	World Development Indicators
M&A	Mergers & Acquisitions	Dummy variable that takes the value one if a bank participated in M&A in year t and zero otherwise.	±	Central banks and BankScope
M&At + n	Years after mergers	Dummy variable that equals one, n years after the merger.	±	Central banks and BankScope

The authors recomputed data from sources to suit the purpose of the study.

Table 3. Summary statistics of selected variables-total sample.

Variable	Obs	Mean	Std. Dev	Min	Max
ROA	672	3.317	12.650	−20.270	315.126
ROE	667	27.091	133.073	−195.883	3359.425
NIM	667	5.783	3.683	−0.762	35.438
CON	651	20.458	19.811	0.000	91.119
CI	668	88.276	239.600	−1371.97	4495.062
GLTA	671	47.034	17.411	0.000	107.485
BSIZE	672	8.725	0.627	5.481	11.182
GLD	644	73.450	53.184	0.000	583.849
CTA	671	5.600	3.203	−0.221	33.447
ZSCORE	671	33.373	403.284	−3.910	8455.077
GDPG	672	5.873	3.328	−7.652	14.047
INFL	672	17.672	5.144	5.871	27.845

Source: Computed by author based on data from Bank Scope – ROA- return on assets, ROE- return on equity, NIM- net interest margin, GLTA – gross loans to total assets; CI – cost to income ratio; CON- HHI – market concentration; BSIZE-bank size, GLD-gross loans to deposit ratio, CTA- cost to total assets ratio, M&A_i,t+n- mergers and acquisitions variable for each year of merger, ZSCORE-(Capital ratio + ROA)/ᵹROA, GDPG –changes in GDP, INFL- inflation.

Table 4. Impact of bank M&As on bank profitability-total sample.

	(1a)	(1b)	(2a)	(2b)	(3a)	(3b)
VARIABLES	ROA	ROA	ROE	ROE	NIM	NIM
Lag Dep. Variable	0.00172	0.00349***	0.0132***	0.015***	0.534***	0.527***
	(0.001)	(0.001)	(0.001)	(0.002)	(0.001)	(0.001)
CON	−0.019*	−0.006	0.136*	0.148*	−0.013***	−0.013***
	(0.011)	(0.010)	(0.073)	(0.082)	(0.005)	(0.004)
CI	−0.001	−0.001	−0.005*	−0.006**	−0.001***	−0.001***
	(0.001)	(0.001)	(0.003)	(0.003)	(0.0002)	(0.0003)
GLTA	−0.036***	−0.038***	−0.236***	−0.194***	−0.010***	−0.011***
	(0.004)	(0.009)	(0.031)	(0.051)	(0.002)	(0.001)
BSIZE	0.260	0.069	3.780	3.782	0.336***	0.381***
	(0.287)	(0.351)	(2.513)	(3.169)	(0.093)	(0.095)
CTA	−0.284***	−0.247***	−1.925***	−1.773***	0.200***	0.205***
	(0.031)	(0.034)	(0.238)	(0.334)	(0.010)	(0.009)
GLD	0.007***	0.005***	−0.022*	−0.036**	0.006***	0.005***
	(0.002)	(0.002)	(0.013)	(0.015)	(0.001)	(0.001)
ZSCORE	0,000	0,000	−0.005***	−0.006***	−0.0001***	−0.0002***
	(0.000)	(0,000)	(0.002)	(0.001)	(0,000)	(0,000)
GDPG	0.066***	0.103***	0.499***	0.513***	−0.004***	−0.002
	(0.018)	(0.023)	(0.107)	(0.180)	(0.001)	(0.001)
INFL	−0.204	0.194	−4.338***	−4.114***	−0.344***	−0.250***
	(0.130)	(0.129)	(0.543)	(0.755)	(0.022)	(0.021)
Merger t		−1.055***		−0.467		−0.996***
		(0.151)		(1.487)		(0.206)
Merger t + 1		−1.111***		5.446***		−0.604***
		(0.175)		(0.983)		(0.211)
Merger t + 2		−0.540***		−3.281**		−0.741***
		(0.148)		(1.346)		(0.155)
Merger t + 3		−1.145***		−5.594***		0.032
		(0.260)		(1.676)		(0.220)
Merger t + 4		−0.896***		−6.549***		−0.531
		(0.208)		(1.561)		(0.331)
Merger t + 5		−1.572***		−9.930***		−0.323
		(0.256)		(1.604)		(0.318)
Merger t + 6		−0.928***		−5.576***		−0.819***
		(0.091)		(0.610)		(0.241)
Constant	3.396	4.274	13.62	14.00	−0.363	−0.727
	(2.599)	(3.212)	(22.55)	(27.39)	(0.868)	(0.879)
Observations	553	553	550	550	548	548
AR(1)	0.014***	0.008***	0,036***	0.034***	0.000***	0.000***
AR(2)	0.211	0.169	0.291	0.297	0.690	0.750
Hansen	0.104	0.307	0.444	0.678	0.293	0.521
F-Statistic	166.2***	231.69***	71.32***	101.41***	298.27***	395.55***

Standard errors in parentheses, *** p < 0.01, ** p < 0.05, * p < 0.1.

Source: Computed by author based on data from Bank Scope – ROA- return on assets, ROE- return on equity, NIM- net interest margin, GLTA – gross loans to total assets; CI – cost to income ratio; CON- HHI – market concentration; BSIZE-bank size, GLD-gross loans to deposit ratio, CTA- cost to total assets ratio, ZSCORE-(Capital ratio + ROA)/ᵹROA, GDPG –changes in GDP, INFL- inflation, M&A_i,t+n- mergers and acquisitions variable for each year of merger.

Table 5. Impact of bank M&As on bank profitability-regulation induced sub-sample.

	(1)	(2)	(3)	(4)	(5)	(6)
VARIABLES	ROA	ROA	ROE	ROE	NIM	NIM
Lag Dep. Variable	0.007***	0.008***	0.012***	0.012***	0.365***	0.373***
	(0.001)	(0.001)	(0.001)	(0.001)	(0.004)	(0.004)
CON	−0.114***	−0.084**	−0.263	−0.066	−0.163***	−0.154***
	(0.035)	(0.034)	(0.183)	(0.198)	(0.010)	(0.011)
CI	−0.0003	−0.001	−0.003	−0.004	−0.001***	−0.001***
	(0.0004)	(0.001)	(0.003)	(0.003)	(0.000)	(0.000)
GLTA	−0.019	−0.023	−0.047	−0.012	−0.007***	−0.004
	(0.017)	(0.016)	(0.090)	(0.091)	(0.002)	(0.003)
BSIZE	−0.620*	−0.403	−0.948	3.104	0.172	0.0909
	(0.365)	(0.312)	(2.393)	(2.789)	(0.108)	(0.109)
CTA	−0.253**	−0.315***	−1.700***	−1.409**	0.212***	0.206***
	(0.098)	(0.087)	(0.529)	(0.567)	(0.014)	(0.016)
GLD	0.008	0.011	−0.036	−0.022	0.009***	0.007***
	(0.010)	(0.010)	(0.058)	(0.054)	(0.002)	(0.001)
ZSCORE	0.000	0.0001	−0.006***	−0.005***	−0.000***	−0.0005***
	(0.0001)	(0.0001)	(0.001)	(0.001)	(0.000)	(0.000)
GDPG	0.083***	0.109***	0.232**	0.319*	−0.019***	−0.011***
	(0.030)	(0.028)	(0.089)	(0.165)	(0.001)	(0.002)
INFL	0.557**	1.002***	−4.628***	−0.266	0.175***	0.236***
	(0.270)	(0.254)	(1.224)	(1.098)	(0.054)	(0.061)
Merger t		−0.693***		−6.411***		−0.586***
		(0.240)		(1.023)		(0.168)
Merger t + 1		−0.972***		−5.037***		−0.197
		(0.236)		(1.261)		(0.216)
Merger t + 2		−1.221***		−7.998***		−0.580***
		(0.282)		(2.350)		(0.168)
Merger t + 3		−1.217**		−12.42*		0.167
		(0.495)		(6.361)		(0.145)
Merger t + 4		−1.617***		−13.67***		−0.900***
		(0.367)		(2.663)		(0.291)
Merger t + 5		−1.125**		−15.21***		−0.830***
		(0.518)		(3.924)		(0.306)
Merger t + 6		−1.207**		−11.96**		−1.013***
		(0.571)		(4.958)		(0.355)
Constant	10.16***	7.729**	51.96**	5.784	2.606***	3.281***
	(3.110)	(2.963)	(20.51)	(25.13)	(0.946)	(0.785)
Observations	387	387	386	386	386	386
AR(1)	0.036***	0.026***	0,013***	0.011***	0.000***	0.000***
AR(2)	0.517	0.488	0.189	0.165	0.538	0.523
Hansen	0.293	0.395	0.512	0.519	0.683	0.362
F-Statistic	243.65***	249.86***	1051.1***	1680***	4523***	6503***

Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1.

Source: Computed by the author based on data from Bank Scope – ROA- return on assets, ROE- return on equity, NIM- net interest margin, GLTA – gross loans to total assets; CI – cost to income ratio; CON- HHI – market concentration; BSIZE-bank size, GLD-gross loans to deposit ratio, CTA- cost to total assets ratio, ZSCORE-(Capital ratio + ROA)/ᵹROA, GDPG –changes in GDP, INFL- inflation. M&A_i,t+n-mergers and acquisitions variable for each year of merger.

Table 6. Impact of bank M&As on bank profitability-voluntary mergers sub-sample.

	(1a)	(1b)	(2a)	(2b)	(3a)	(3b)
VARIABLES	ROA	ROA	ROE	ROE	NIM	NIM
Lag Dep. Variable	−0.003***	0.001	0.012***	0.013***	0.591***	0.560***
	(0.001)	(0.001)	(0.001)	(0.002)	(0.021)	(0.021)
CON	−0.011	−0.012	0.158***	0.180***	−0.004	−0.004
	(0.009)	(0.009)	(0.052)	(0.058)	(0.004)	(0.004)
CI	−0.029***	−0.016	−0.442***	−0.496***	−0.007*	−0.009**
	(0.010)	(0.013)	(0.061)	(0.070)	(0.004)	(0.004)
GLTA	−0.0201**	−0.0341***	−0.155	−0.0359	−0.00875*	−0.009*
	(0.009)	(0.012)	(0.093)	(0.116)	(0.004)	(0.005)
BSIZE	0.503	0.641	3.877	4.231	0.135	0.130
	(0.344)	(0.421)	(3.055)	(3.720)	(0.126)	(0.130)
CTA	−0.113	−0.103	0.114	0.525	0.188***	0.210***
	(0.101)	(0.101)	(0.297)	(0.363)	(0.026)	(0.027)
GLD	0.005***	0.005***	−0.034***	−0.045**	0.004***	0.004***
	(0.002)	(0.002)	(0.011)	(0.017)	(0.001)	(0.001)
ZSCORE	−0.000	0.000	−0.005***	−0.005***	0.000	−0.000*
	(0.0001)	(0.000)	(0.001)	(0.001)	(0.000)	(0.000)
GDPG	0.0418***	0.091***	0.201**	−0.080	−0.020***	−0.017***
	(0.015)	(0.024)	(0.093)	(0.258)	(0.005)	(0.005)
INFL	−0.825***	0.179	−4.051***	−3.652	−0.669***	−0.678***
	(0.171)	(0.396)	(1.464)	(3.552)	(0.0646)	(0.0746)
Merger t		−1.032***		19.83***		−0.581
		(0.255)		(3.018)		(0.455)
Merger t + 1		−0.569***		18.22***		−0.395
		(0.210)		(3.465)		(0.392)
Merger t + 2		−0.0732		−9.223***		−1.177***
		(0.285)		(3.199)		(0.253)
Merger t + 3		0.0165		1.038		0.0195
		(0.499)		(3.216)		(0.326)
Merger t + 4		−0.318		0.959		1.157***
		(0.504)		(3.849)		(0.349)
Merger t + 5		−0.295		−9.287**		1.151***
		(0.497)		(3.697)		(0.254)
Merger t + 6		0.273		5.211		−0.0677
		(0.382)		(4.347)		(0.393)
Constant	2.281	−0.676	28.01	20.96	2.051*	2.256*
	(3.262)	(3.982)	(27.70)	(33.63)	(1.096)	(1.151)
Observations	330	330	328	328	326	326
AR(1)	0.012***	0.125	0,001***	0.001***	0.146	0.162
AR(2)	0.110	0.258	0.297	0.350	0.305	0.316
Hansen	0.100	0.330	0.100	0.128	0.879	0.635
F-Statistic	980.46***	824.87***	0.000***	0.000***	2781***	127.80***

Standard errors in parentheses *** p < 0.01, ** p < 0.05, * p < 0.1.

Source: Computed by the author based on data from Bank Scope – ROA- return on assets, ROE- return on equity, NIM- net interest margin, GLTA – gross loans to total assets; CI – cost to income ratio; CON- HHI – market concentration; BSIZE-bank size, GLD-gross loans to deposit ratio, CTA- cost to total assets ratio, ZSCORE-(Capital ratio + ROA)/ᵹROA, GDPG –changes in GDP, INFL- inflation. M&A_i,t+n-mergers and acquisitions variable for each year of merger.

Table 7. Fixed effects.

Bank	Pre-merger	Post-merger	t-test
2	27.218	7.126	9.718**
4	29.934	−4.767	7.604**
5	−44.022	−23.980	−2.501
6	21.008	−8.276	4.046*
7	20.907	−16.849	3.030*
8	10.745	−18.601	6.319**
9	10.117	−23.543	2.462
10	15.063	−16.629	37.723***
11	5.580	−22.529	3.220*
12	10.379	−14.202	1.813
13	19.072	−17.198	3.114*
14	21.219	−21.756	5.101*
15	5.697	−1.260	0.749
16	8.275	−34.074	22.244***
17	21.080	−17.435	42.573***
18	41.113	24.793	2.493
19	19.334	−11.006	4.438*
20	−12.859	−5.972	−0.265
21	−63.673	28.324	−0.390
22	−46.148	−23.183	−0.690

Data availability

Data is available upon request.