THE ROLE OF MERGERS ON MARKET STRUCTURE IN THE BANKING INDUSTRY OF PAKISTAN

Hakim Ali Mahesar; Maryam Kalhoro; Mushtaque Ali Jariko

Hakim Ali Mahesar Institute of Commerce, University of Sindh, Jamshoro
Maryam Kalhoro PhD Student, Institute of Commerce, University of Sindh, Jamshoro
Mushtaque Ali Jariko Institute of Business Administration, University of Sindh, Jamshoro

Keywords: Merger, Profitability, Operational cost, Market share, Customer base, Banking industry of Pakistan

Abstract

The aim of this investigation is to find out the impact of mergers on the market structure in banking industry of Pakistan. Furthermore, this research examines the impact of merger on profitability, operational costs, and customer base and market share of the commercial banks. This study employs case method to extract relevant data. Sample size of this research comprises of Faysal Bank and Royal Bank of Scotland (RBS) 2011, Summit Bank, and My Bank and Atlas Bank 2011. The official website of State Bank of Pakistan (SBP) was used to get the secondary data which includes the annual reports of the mergers Pre-merger and post-merger financial statements of the year 2010 and 2011 of merged banks were analyzed. In addition, a comparative financial ratio analysis was used for testing and interpreting the data. Hence, this study presents the four major findings which include; first, merger shows positive relationship with profitability. Second, the pre-merger and post-merger deposits of banks show that merger increases customer base. Third, merger also increases operational costs. Fourth, mergers show positivity with the market share of the banks. The authors of this study suggest more qualitative and quantitative empirical research on the mergers so that a better scientific understanding can be developed.