3/7/2022 The Effect of
Mergers and
Acquisitions on
Financial
Performance of
Banks in USA
Research Proposal
, The Effect of Mergers and Acquisitions on Financial Performance of Banks in USA
Research Area
The American banking sector has undergone some of the biggest changes over the last
decades due to the unprecedented amount of financial consolidation among various banks. Banks
in the United States have continually engaged in mergers and acquisitions as they seek to gain
sustainable, effective, and highest growth levels after the financial consolidation. The
development of mergers and acquisitions does not just happen in the US banking industry, but it
has also occurred in other sectors. However, the financial consolidation in the banking industry is
an interesting topic due to the nature of this sector. According to Welten (2017), the financial
consolidation between banks is different from the financial consolidation in other sectors since
the mergers and the acquisitions have to be approved by the banking regulatory authorities as per
the 1966 Bank Merger Act. Several factors will lead to mergers and acquisitions in the banking
industry. This paper seeks to identify the effects that mergers and acquisitions have on the
financial performance of banks in the United States.
Banks will engage in mergers and acquisitions to increase their total value when they
consolidate into a single entity (Riaz, 2020). This premise means that mergers and acquisition in
the banking industry will affect the financial performance of banks. Notably, when banks merge
to diversify their products they perform better than product focused mergers (Faisal Khan et al.,
2016). Moreover, when shareholders and owners of a bank realize that it is operating less
efficiently and earning low profits, they may ask another financial institution to acquire the bank.
On the contrary, more profitable banks may merge with or acquire other banking businesses as
they seek avenues of expansion. The underlying factors that lead to the mergers and acquisitions
of banks vary. This paper is interested in identifying how mergers and acquisitions affected the
, financial performance of banks during and after the 2008 financial crisis. According to Buch et
al. (2018), the number of banks in most countries reduced significantly due to mergers and
acquisitions that involved small financial institutions and some distressed large banks. Therefore,
this paper will seek to identify the financial performance of banks that engaged in mergers and
acquisitions from 2008 up to date. The paper will determine the financial performance of the
acquiring and the merging banks during the aforementioned period to determine the effects that
mergers and acquisitions have on banks' financial performance. The financial performance of the
banks during the period will be determined using accounting-based measures such as return on
equity (ROE) or return on assets (ROA), as proposed by Cobanoglu and Della Corte (2021) and
Elferink (2021).
Objectives of the Research
This particular study will be guided by the following objectives
1. To estimate how banks that merged and acquired during and after the 2008 financial
crisis performed using accounting-based measures.
2. To evaluate whether merging and acquisition improves or decreases the financial
performance of financial banks in the US.
3. To determine whether lowly performing banks should agree to be acquired by better
performing banks.
4. To determine whether better performing banks should merge with other banks when
seeking expansion opportunities.
Literature Review
Positive Impacts of Mergers and Acquisition on Financial Performance of Banks
Mergers and
Acquisitions on
Financial
Performance of
Banks in USA
Research Proposal
, The Effect of Mergers and Acquisitions on Financial Performance of Banks in USA
Research Area
The American banking sector has undergone some of the biggest changes over the last
decades due to the unprecedented amount of financial consolidation among various banks. Banks
in the United States have continually engaged in mergers and acquisitions as they seek to gain
sustainable, effective, and highest growth levels after the financial consolidation. The
development of mergers and acquisitions does not just happen in the US banking industry, but it
has also occurred in other sectors. However, the financial consolidation in the banking industry is
an interesting topic due to the nature of this sector. According to Welten (2017), the financial
consolidation between banks is different from the financial consolidation in other sectors since
the mergers and the acquisitions have to be approved by the banking regulatory authorities as per
the 1966 Bank Merger Act. Several factors will lead to mergers and acquisitions in the banking
industry. This paper seeks to identify the effects that mergers and acquisitions have on the
financial performance of banks in the United States.
Banks will engage in mergers and acquisitions to increase their total value when they
consolidate into a single entity (Riaz, 2020). This premise means that mergers and acquisition in
the banking industry will affect the financial performance of banks. Notably, when banks merge
to diversify their products they perform better than product focused mergers (Faisal Khan et al.,
2016). Moreover, when shareholders and owners of a bank realize that it is operating less
efficiently and earning low profits, they may ask another financial institution to acquire the bank.
On the contrary, more profitable banks may merge with or acquire other banking businesses as
they seek avenues of expansion. The underlying factors that lead to the mergers and acquisitions
of banks vary. This paper is interested in identifying how mergers and acquisitions affected the
, financial performance of banks during and after the 2008 financial crisis. According to Buch et
al. (2018), the number of banks in most countries reduced significantly due to mergers and
acquisitions that involved small financial institutions and some distressed large banks. Therefore,
this paper will seek to identify the financial performance of banks that engaged in mergers and
acquisitions from 2008 up to date. The paper will determine the financial performance of the
acquiring and the merging banks during the aforementioned period to determine the effects that
mergers and acquisitions have on banks' financial performance. The financial performance of the
banks during the period will be determined using accounting-based measures such as return on
equity (ROE) or return on assets (ROA), as proposed by Cobanoglu and Della Corte (2021) and
Elferink (2021).
Objectives of the Research
This particular study will be guided by the following objectives
1. To estimate how banks that merged and acquired during and after the 2008 financial
crisis performed using accounting-based measures.
2. To evaluate whether merging and acquisition improves or decreases the financial
performance of financial banks in the US.
3. To determine whether lowly performing banks should agree to be acquired by better
performing banks.
4. To determine whether better performing banks should merge with other banks when
seeking expansion opportunities.
Literature Review
Positive Impacts of Mergers and Acquisition on Financial Performance of Banks
