Impact of Mergers and Acquisitions on Productivity of Indian Banks

Abstract

In this paper, we examine how M&A affect Productivity in case of Indian banking sector. The sample ofthe study comprises of Indian banks
mergingfrom the period 2005-2010. Data EnvelopmentAnalysis along with Malmquist Indexapproach is employed to testfor the impactof
Mergers and Acquisitions.We find that the average totalfactor productivity from 2005-2010 across the eight banks has shown a declining
trend.The productivity has marginally increased for Bank ofBaroda (0.3%) andFederal Bank (1.5%) but it has declinedfor all other banks.
Overall the total factor productivity has decreased by 1.8%. As this change has not been substantial, it can be said that the merger and
acquisition activity has not significantly impacted the total factor productivity of banks in India..We further observe that the decrease in
total factor productivity was mainly due toto decrease in technological and pure technical efficiency whereas technical efficiency remain
unchanged and scale efficiency increased marginally The study is extremely relevant for common shareholders, globalfund managers as
well asfinancial regulators as it gives insights on the relevance on Mergers & Acquisitions in Banking sector. The present research contributes
to analysis of corporate restructuring in Indian bankingsector.