Comparison of the Financial Performance of Banking Companies Before and After Merger or Acquisition

Authors

  • Zahara Zahara Accounting Department, Politeknik Negeri Padang, Padang, Indonesia
  • Putrie Alang Sari Department of Accounting, Politeknik Negeri Padang, Padang, Indonesia
  • Syafira Ramadhea Jr Department of Accounting, Politeknik Negeri Padang, Padang, Indonesia
  • Wiwik Andriani Department of Accounting, Politeknik Negeri Padang, Padang, Indonesia

DOI:

https://doi.org/10.55980/esber.v2i2.91

Keywords:

Financial Performance, Merger, Acquisition, Banking, Signaling Theory

Abstract

In competitive era nowadays, management is expected to make the right business strategies, including merger or acquisition actions, for optimizing the value of the company. This study aims to analyze the differences in financial performance before and after a merger or acquisition. The research method used is a quantitative approach with secondary data obtained from the idx.co.id website. The population in this study were banking sector companies listed on the Indonesia Stock Exchange (IDX). The sampling technique was carried out using purposive sampling method with a total sample of 6 companies. The research data used are financial statements for 2 years before and 2 years after the merger and acquisition. The data is processed using the SPSS v.25 application. The results of the study using the Wilcoxon signed test showed that there were significant differences in TATO and EPS after the merger or acquisition, then there were no significant differences in CR, DER, ROA, and NPL.

References

Aalbers, R. (H L. )., McCarthy, K. J., & Heimeriks, K. H. (2021). Market reactions to acquisition announcements: The importance of signaling ‘why’ and ‘where.’ Long Range Planning, 54(6), 1–22. https://doi.org/10.1016/j.lrp.2021.102105

Adhikari, B., Kavanagh, M., & Hampson, B. (2023a). A comparative analysis of the financial performance of commercial banks after mergers and acquisitions using Nepalese data. Central Bank Review, 23(3), 100128. https://doi.org/10.1016/j.cbrev.2023.100128

Adhikari, B., Kavanagh, M., & Hampson, B. (2023b). Analysis of the pre-post-merger and acquisition financial performance of selected banks in Nepal. Asia Pacific Management Review, 28(4), 449–458. https://doi.org/10.1016/j.apmrv.2023.02.001

Ai, Q., & Tan, H. (2020). Uncovering neglected success factors in post-acquisition reverse capability transfer: Evidence from Chinese multinational corporations in Europe. Journal of World Business, 55(3). https://doi.org/10.1016/j.jwb.2019.101053

Battisti, E., Graziano, E. A., Pereira, V., Vrontis, D., & Giovanis, A. (2023). Talent management and firm performance in emerging markets: a systematic literature review and framework. Management Decision, 61(9), 2757–2783. https://doi.org/10.1108/MD-10-2021-1327

Bernard, D., Blackburne, T., & Thornock, J. (2020). Information flows among rivals and corporate investment. Journal of Financial Economics, 136(3), 760–779. https://doi.org/10.1016/j.jfineco.2019.11.008

Bindal, S., Bouwman, C. H. S., Hu, S. (Sophia), & Johnson, S. A. (2020). Bank regulatory size thresholds, merger and acquisition behavior, and small business lending. Journal of Corporate Finance, 62(September 2019), 101519. https://doi.org/10.1016/j.jcorpfin.2019.101519

Bonaime, A., Gulen, H., & Ion, M. (2018). Does policy uncertainty affect mergers and acquisitions? Journal of Financial Economics, 129(3), 531–558. https://doi.org/10.1016/j.jfineco.2018.05.007

Chen, J., Mishra, T., Song, W., Zhang, Q., & Zhang, Z. (2024). The impact of bank mergers on corporate tax aggressiveness. Journal of Corporate Finance, 84(April 2022), 102540. https://doi.org/10.1016/j.jcorpfin.2024.102540

Chen, W., Jin, F., & Xue, L. (2022). Flourish or Perish? The Impact of Technological Acquisitions on Contributions to Open-Source Software. Information Systems Research, 33(3), 867–886. https://doi.org/10.1287/isre.2021.1086

Dang, T. L., Luong, H., Nguyen, L., & Nguyen, M. (2024). Political uncertainty and commonality in liquidity. Pacific Basin Finance Journal, 83(October 2023), 102249. https://doi.org/10.1016/j.pacfin.2023.102249

Du, K., & Sim, N. (2016). Research in International Business and Finance Mergers , acquisitions , and bank efficiency : Cross-country evidence from emerging markets ଝ. Research in International Business and Finance, 36, 499–510.

Elekdag, S., Malik, S., & Mitra, S. (2020). Breaking the Bank? A Probabilistic Assessment of Euro Area Bank Profitability. Journal of Banking and Finance, 120, 105949. https://doi.org/10.1016/j.jbankfin.2020.105949

Fukuyama, H., Matousek, R., & Tzeremes, N. G. (2022). Bank production with nonperforming loans: A minimum distance directional slack inefficiency approach. Omega (United Kingdom), 113, 102706. https://doi.org/10.1016/j.omega.2022.102706

Garad, A., Rahmawati, A., & Pratolo, S. (2021). The impact of board directors, audit committee and ownership on financial performance and firms value. Universal Journal of Accounting and Finance, 9(5), 982–994. https://doi.org/10.13189/ujaf.2021.090509

Gigante, G., Cerri, A., & Leone, G. (2023). The impact of mergers and acquisitions on shareholders’ value: an empirical study of pharmaceutical companies. Managerial Finance, 49(8), 1241–1264. https://doi.org/10.1108/MF-01-2022-0015

Gupta, I., Raman, T. V., & Tripathy, N. (2023). Impact of Merger and Acquisition on Financial Performance: Evidence from Construction and Real Estate Industry of India. FIIB Business Review, 12(1), 74–84. https://doi.org/10.1177/23197145211053400

Hanelt, A., Firk, S., Hildebrandt, B., & Kolbe, L. M. (2021). Digital M&A, digital innovation, and firm performance: an empirical investigation. European Journal of Information Systems, 30(1), 3–26. https://doi.org/10.1080/0960085X.2020.1747365

Hernawati, R. I., Ghozali, I., Yuyetta, E. N. A., & Prastiwi, A. (2021). The Effect of Income and Earnings Management on Firm Value: Empirical Evidence from Indonesia. Journal of Asian Finance, Economics and Business, 8(4), 105–112. https://doi.org/10.13106/jafeb.2021.vol8.no4.0105

Hughes, J. P., Lang, W. W., Mester, L. J., Moon, C. G., & Pagano, M. S. (2003). Do bankers sacrifice value to build empires? Managerial incentives, industry consolidation, and financial performance. Journal of Banking and Finance, 27(3), 417–447. https://doi.org/10.1016/S0378-4266(02)00385-0

Hughes, P., Hughes, M., Stokes, P., Lee, H., Rodgers, P., & Degbey, W. Y. (2020). Micro-foundations of organizational ambidexterity in the context of cross-border mergers and acquisitions. Technological Forecasting and Social Change, 153(February), 119932. https://doi.org/10.1016/j.techfore.2020.119932

Idris, F., Buchdadi, A. D., Muttaqien, M. R., & Hariguna, T. (2020). The role of the board of director with political connection for increasing the firm value. Accounting, 6(7), 1285–1290. https://doi.org/10.5267/j.ac.2020.8.023

Ji, M., & Jiang, L. (2022). Aggressive CEOs and bank mergers and acquisitions. Journal of Contemporary Accounting and Economics, 18(3), 100318. https://doi.org/10.1016/j.jcae.2022.100318

Kobayashi, A. (Tanaka), & Bremer, M. (2022). Lessons from mergers and acquisitions of regional banks in Japan: What does the stock market think? Journal of the Japanese and International Economies, 64(February), 101202. https://doi.org/10.1016/j.jjie.2022.101202

Krukowski, K. A., & DeTienne, D. R. (2022). Selling a business after the pandemic? How crisis and information asymmetry affect deal terms. Business Horizons, 65(5), 617–630. https://doi.org/10.1016/j.bushor.2021.08.003

Krukowski, K. A., Flink, N. A., & Edwards, B. D. (2023). Why are you selling your business? Understanding signaling effects of seller rationale at time of entrepreneurial exit. Journal of Business Venturing Insights, 20(July), e00427. https://doi.org/10.1016/j.jbvi.2023.e00427

Kuswati, A. N., Syihab, F., & Ramayanti, R. (2022). Steel and aluminium industry reactions of import rate announcement : event study analysis. 1, 76–87. https://doi.org/10.55980/ebasr.v1i2.10

Liu, Y., Vrontis, D., Visser, M., Stokes, P., Smith, S., Moore, N., Thrassou, A., & Ashta, A. (2021). Talent management and the HR function in cross-cultural mergers and acquisitions: The role and impact of bi-cultural identity. Human Resource Management Review, 31(3), 100744. https://doi.org/10.1016/j.hrmr.2020.100744

Mehrotra, A., & Sahay, A. (2022). Financial Performance of Firms Pre- and Post-M&A: A Study of Selected Indian Acquirers. Vision: The Journal of Business Perspective, 097226292210873. https://doi.org/10.1177/09722629221087367

Natsir, M., Soedarmono, W., April Yudhi, W. S., Trinugroho, I., & Warokka, A. (2019). Foreign penetration, competition, and credit risk in banking. Borsa Istanbul Review, 19(3), 249–257. https://doi.org/10.1016/j.bir.2019.05.003

Nguyen, N. H., & Phan, H. V. (2017). Policy Uncertainty and Mergers and Acquisitions. In Journal of Financial and Quantitative Analysis (Vol. 52, Issue 2). https://doi.org/10.1017/S0022109017000175

Rao-Nicholson, R., Khan, Z., Akhtar, P., & Tarba, S. Y. (2020). The contingent role of distributed leadership in the relationship between HR practices and organizational ambidexterity in the cross-border M&As of emerging market multinationals. The International Journal of Human Resource Management, 31(2), 232–253. https://doi.org/10.1080/09585192.2016.1216882

Sengar, N., Badhotiya, G. K., Dobriyal, R., & Singh, D. B. (2021). Study of post-merger effect on performance of banks in India. Materials Today: Proceedings, 46, 10766–10770. https://doi.org/10.1016/j.matpr.2021.01.671

Tampakoudis, I., Nerantzidis, M., Artikis, P., & Kiosses, N. (2022). The effect of board size on shareholder value: Evidence from bank mergers and acquisitions. European Management Journal, 40(6), 883–894. https://doi.org/10.1016/j.emj.2022.09.002

Vanwalleghem, D., Yildirim, C., & Mukanya, A. (2020). Leveraging local knowledge or global advantage: Cross border bank mergers and acquisitions in Africa. Emerging Markets Review, 42(January 2019), 100656. https://doi.org/10.1016/j.ememar.2019.100656

Vyshnevskyi, I., & Sohn, W. (2023). Nonperforming loans and related lending: Evidence from Ukraine. Emerging Markets Review, 57(May 2022), 101069. https://doi.org/10.1016/j.ememar.2023.101069

Yildirim, C., Tensaout, M., & Belousova, V. (2023). Cross-border mergers and acquisitions by emerging country banks: What do acquisition premiums tell us? Research in International Business and Finance, 66(July), 102042. https://doi.org/10.1016/j.ribaf.2023.102042

Zimon, G., Appolloni, A., Tarighi, H., Shahmohammadi, S., & Daneshpou, E. (2021). Earnings management, related party transactions and corporate performance: the moderating role of internal control. Risks, 9(8), 1–26. https://doi.org/10.3390/risks9080146

Downloads

Published

2023-08-02

How to Cite

Zahara, Z., Alang Sari, P., Ramadhea Jr, S., & Andriani, W. (2023). Comparison of the Financial Performance of Banking Companies Before and After Merger or Acquisition . Entrepreneurship and Small Business Research, 2(2), 68–77. https://doi.org/10.55980/esber.v2i2.91