Evaluating Intention-Linked Post-M&A Performance of the Indian Banks: Effect of Indian Regulatory Developments
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Abstract
The banking sector is rapidly consolidating, yet the motivating intentions and performance impacts of mergers and acquisitions (M&As) remain unclear, which the present study examines in the context of Indian banking sector from 2015 to 2019. Using a one-sample Wilcoxon signed-rank test, this research identifies multiple intentions for M&As, including synergy realization, efficiency-seeking, enhancing size to become globally competitive, improving NPAs and risk management, meeting the economy's funding needs, increasing the bank's revenue, market-seeking, offering quality products and services, and enhancing technological resources. This study presents a method for analyzing the thoughts of banking personnel to examine the intentions driving banking M&As. It emphasizes that the banking sector has unique intentions distinct from those of other organizations in different industries. This study contributes to accounting theory and corporate governance by integrating regulatory developments like (Ind AS) Indian Accounting Standards and the norms of the India (RBI) Reserve Bank of into an intention-linked performance evaluation model to evaluate Post-M&A performance of merged banks. It develops a framework connecting M&A intentions: to increase the bank's revenue, meet the economy's funding needs, enhance the size to become globally competitive, and exercise better NPA and risk management, to Post-M&A performance metrics: credit availability, profitability, asset size, and Gross NPAs. A paired sample t-test reveals that the M&As have an insignificant impact on these metrics of the merged banks three years following the M&A, nevertheless, regulatory developments may play a significant role. The study offers implications for accounting standards, auditors, and governance codes.
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