Research Methodology:
This study analyses the financial data of selected acquirer banks in the period of 2000-2010. In order to evaluate the financial performances of the merging banks in the long run, at least five years financial data is required.
Data Collections:
The required data is going to collect from the annual reports of the selected banks to calculate the financial performances. This research is going to evaluate the financial performances of 4 banks (2 private sector banks i.e. HDFC & ICICI BANK and 2 public sector banks i.e. SBI and Indian Overseas Bank.) pre and post mergers and acquisitions period for 10 years i.e. 5years pre mergers and acquisitions and 5years post mergers and acquisitions period. The pre and post financial performances will be evaluated with the help net income, net profit, operating profit, and profit after tax, working capital, earning per share, and market price per share, deposits and investments, which all information’s will derived from its financial report.
The required data to calculate shareholder’s wealth is going to collect from the BSE Index. To calculate the shareholder’s wealth of acquirer banks ‘EVENT STUDY’ method is going to adopt. To do Event Study, Event Window has been taken for 21 days (i.e. 10 days before the event and 10 days after the particular event and one day is the particular event date).
Apart from the above primary data, the secondary data is going collect from various sources like the Reserve Bank of India website, various newspapers, magazines and journals articles etc.
Table2: List of Mergers and Acquisitions happened with selected acquirer banks from 2000- 2010:
Name of acquired bank Name of acquirer bank Date of Merger Times Bank Ltd. HDFC Bank Ltd. February26, 2000 Bank of Madura Ltd. ICICI Bank Ltd. March10, 2001 Bharat Overseas Bank Ltd Indian Overseas Bank March 31,2007 Centurion Bank of Punjab Ltd. HDFC Bank Ltd. May 23, 2008 State Bank of Indore State Bank of India August 10, 2010 Bank Of Rajasthan ICICI Bank Ltd. May 18,2010 Source: “Competition and Consolidation: Recent Trends in Mergers and Amalgamations”, RBI Publications, Vol. VIII, Dated: 04 Sep 2008. ‘State Bank of Indore branches to become SBI units from Aug 26’, The Economic Times, August 25, 2010. ‘ICICI Bank Board gives in-principle approval for merger of Bank of Rajasthan’, News Release By ICICI Bank, May 18, 2010.
Statistical Tools: The impact of mergers and acquisitions on financial performances of the acquirer bank can be tested with the help of Paired ‘t’ test. Paired T test is applicable when the data is derived from study subjects who have been measured at two time points (so each individual has two measurements). The two measurements generally are before and after a treatment intervention.
And, the impact of mergers and acquisitions on shareholder’s wealth can be tested with the help of ‘t’ test. A t-test is a statistical hypothesis test in which the test statistic follows a Student's t distribution if the null hypothesis is supported. Student's t-test deals with the problems associated with inference based on "small" samples: the calculated mean and standard deviation may by chance deviate from the "real" mean and standard deviation.
A confidence interval of 95% has been set for difference in means.