Effects of Mergers and Acquisitions on the Financial Performance of Commercial Banks in Developing Countries—A Case of Zambia

Abstract

Mergers and acquisitions are one of the most famous inorganic investment strategies used to grow and expand business operations across the world. However, studies show that the effects of mergers and acquisitions on the financial performance of commercial banks are inconsistent. Although many studies have been conducted on mergers and acquisitions worldwide, in Zambia more studies need to be conducted because little information on the effects of mergers and acquisitions on the financial performance of commercial banks is known. The study aimed to assess the effects of mergers and acquisitions on the financial performance of commercial banks in Zambia. Descriptive statistics and paired sample t-tests were used for the 2 years before and after merger and acquisition for the collected secondary data for mergers and acquisitions that occurred between 2009 to 2019. Finance Bank Zambia, BancABC Zambia and Atlasmara Zambia were selected using convenient sampling. The indicators of financial performance showed mixed results after the study. The liquidity and profitability ratios that were analyzed showed that there was no significant improvement in the financial performance of the business. The efficiency ratio showed improvement with a p-value of 0.014 while the leverage ratios showed mixed results. The study will fill the information gap and help investors, shareholders and bank managers inter alia in making critical decisions on mergers and acquisitions as a long-term business strategy.