Assessing the Strategic and Financial Similarities of Merged Banks: Evidence from Voluntary Amalgamations in Indian Banking Sector
Scienece & Society, Vol. 8, No. 1, 2010
13 Pages Posted: 16 Aug 2010 Last revised: 12 Sep 2014
Date Written: August 16, 2010
Synergies arising from the increased efficiency, cost savings, economies of scale etc. are the principal factors behind the voluntary amalgamations in the Indian banking sector. Even though, ergers are the major way to adhere to the regulatory requirements and the source of inorganic growth, the strategies adopted by the merging entities have to be critically analysed, because mergers seem to produce strategic and financial growth and also have considerable public policy implications.
The merging partner’s strategical similarities and relatedness are very important in the synergy creation because the relatedness of the strategic variables have a significant impact on the bank performance. On the basis of existing literature, banks should be similar in some areas and dissimilar in some other areas in order to improve post merger performance. In this paper we use firm specific data to study the strategic similarities of bidder and target banks in the voluntary amalgamations in the Indian banking sector. All relevant strategic and financial variables of respective banks are considered to assess their relatedness. It is assumed that balance sheet resource allocation is the indicative of the strategic focus of the banks.
Keywords: Strategic Similarity, Mergers and Acquisitions, Bank
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