B、 Results from Cross-sectional Time-series FGLS Regression Model
VI、 Conclusion
A great deal of attention has been focused on the performance of profitability and efficiency from international mergers and acquisitions. This study conducts various tests to determine the effects may dominate improvement of profitability and
efficiency and to examine whether international mergers and acquisitions may results in improvement in profitability and efficiency of acquiring firms. The study focuses on the samples with international mergers and acquisitions over 1990-2001 period.
The results are quite the same in short-term, mid-term, and long-term after mergers and acquisitions. The acquiring banks have no significant improvement in performance of profitability after mergers and acquisitions; while the acquiring banks have no significant improvement in efficiency gain one-year and three-year after mergers and acquisitions. The acquiring banks are statistically significant in
efficiency performance fifth year after mergers and acquisitions. This may indicate that acquiring banks tends to achieve the efficiency improvement in long run after mergers and acquisitions. The results is similar to previous studies in domestic mergers and acquisitions in banking industry that bank mergers and acquisitions do not necessarily achieve the cost saving or the efficiency gain (Srinivasan and Wall, 1992; Rhoades, 1993). However, this result is different from what have been examined in the study of Diaz Diaz et al. (2002) that deals increase the acquirer’s profitability. Therefore, the results of this study indicate that horizontal international mergers and acquisitions during 1990 –2001 did result in the potential efficiency improvement in the long run, but not in improving profitability performance.
The result is not support hypothesis 1. This may result from 5 year is still too short to show the improvement in profitability. The other possible reason to
influence the result may be that many acquirers had series of consolidation action within few years. The efficiency did improve in long-run, which support the hypothesis 2. This may result from one-time expenses of mergers and acquisitions and other expenses to reorganize the firm after transactions.
Furthermore, the results from regression show major determinants improving profitability and efficiency. The net interest margin plays a significant role to improve the profitability. Expenses cutting and non- interest revenue increasing both are significant to the profitability improvement in first and third year after mergers and acquisition. This result mostly supports the hypothesis 3. This is the same as what have found in some studies with domestic mergers and acquisitions that banks may cut expenses at least in the first year after mergers, and revenue enhancement also potentially important to improving profitability (Linder and Crane, 1993). Both reduction in non- interest revenue ratio and administrative costs ratio may lead improvement in efficiency; while increase in loan ratio would improve the efficiency performance. This indicates that aggressiveness to attract loans may influence the efficiency of the acquiring banks. This result supports the hypothesis 4. This is consistent with what have found that expense ratio tends to decline from before to after merger for banks with a high loan ratio relative to other banks in a study on U.S.
banking industry (Rhoades, 1993). However, number of mergers and acquisitions by acquirer at the observed year may not influence the profitability and efficiency. This is consistent with the study that acquiring banks with multiple mergers and
acquisitions the same year were less likely to reduce post mergers costs (Srinivasan and Wall, 1992).
In addition the results of this work, there are some limitations that may be
may stem from the necessarily limited scope of time and sample composition of this study. Despite the conclusions drawn about the insignificance of profitability and efficiency performance before and after mergers and acquisitions, it is possible to conclude from the analysis that international mergers and acquisitions may have better or worse performance compare to the industry since the much more difficult to construct a control group of non- merging banks like other researches on domestic mergers and acquisitions. Thus, further researches may include empirical tests to comparing with industry as a whole. Due to the rareness of studies of mergers and acquisitions in international issues, there are different views cloud be studied for the further researches, including the international cross- industry merges and acquisitions in financial industry, the wealth effects, managerial control and agency problems, regulatory and cultural effects, etc. The relationship between motives and actual performance in international mergers and acquisitions in banking industry could be further discussed. Regardless of the suggestions of future inquiry, the continued rapid pace of bank mergers and acquisitions should provide a rich source for further exploration of the motives and behavior of banking firms.
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