Assessing Pakistani Bank's Efficiency, A Data Envelopment Analysis Study on Post-M&As

Abstract

Large-scale M&A involved in the banking sector as the primary target have been initiated by nations globally throughout the last decade of the 20th century. A merger is a corporate restructuring tactic that has a wide range of effects on the business's performance. This study analyzed the impact of M&A on the banking industry in Pakistan from 2007 to 2017, covering four years before and after (-4, +4 years) each M&As and calculated the average efficiency score for before and after merger periods. To examine the impact of merger and acquisition on bank efficiency, this study employs DEA method in R software under both CRS and VRS. Three different input and output frameworks are applied to estimate each bank technical efficiency, pure technical efficiency and scale efficiency. The results reveal a mixed impact of M&As on banks efficiency. The result reveals that few banks showed improve efficiency after M&A technique, while many banks face increased inefficiency after M&As. However, In conclusion the research findings depict that Pakistani Banks has not got any beneficial change after mergers and acquisitions (M&As).