Financial Performance and Efficiency Changes of Malaysian Banking Institutions in Mergers and Acquisitions

Abstract

The purpose of this paper is twofold. First, it intends to analyse the financial performance changes of commercial banks on stand alone basis and compare it with 'post merger' basis on the consolidation program initiated by the central bank following the recent 1997-1998 Asian financial crisis. This paper also tries to analyse and explore the efficiency of the banks resulted from this consolidation. The findings suggest that based on the actual accounting data of the anchor banks and DEA analysis, the consolidation program initiated by the central bank does not show any significant difference to the level of efficiency and the financial performance of the banking institutions in Malaysia. The total number of banking institutions as of 20th October 1999 was 55, which consisted of 20 commercial banks, 23 finance companies and 12 merchant banks. They have been given a dateline by end of January 2000 to forward their comprehensive proposal to the Central Bank. Initially the Central Bank, Bank Negara Malaysia (BNM) has approved 6 anchor banks i.e. Maybank, Multi-Purpose, Public, Southern, Perwira Affin and Bumiputra Commerce. Consequently, the number has been increased to 10 with the additional EON, Hong Leong, RHB and Arab Malaysian joining the elite group.

Мета даної статті – проаналізувати фінансові показники змін комерційних банків на незалежній основі та порівняти їх з показниками після поглинання, базованого на програмі консолідації, розпочатій центральним банком після Азіатської фінансової кризи 1997-1998 рр. В цій статті також зроблена спроба проаналізувати та дослідити ефективність банків після консолідації. На основі отриманої інформації, яка базується на фактичних бухгалтерських даних “якорних” банків та DEA аналізі, можна стверджувати, що для програми консолідації немає суттєвої різниці рівня ефективності та фінансових показників банківських установ в Малайзії. The purpose of this paper is twofold. First, it intends to analyse the financial performance changes of commercial banks on stand alone basis and compare it with 'post merger' basis on the consolidation program initiated by the central bank following the recent 1997-1998 Asian financial crisis. This paper also tries to analyse and explore the efficiency of the banks resulted from this consolidation. The findings suggest that based on the actual accounting data of the anchor banks and DEA analysis, the consolidation program initiated by the central bank does not show any significant difference to the level of efficiency and the financial performance of the banking institutions in Malaysia