QUASI-EXPERIMENTAL DESIGN ANALYSIS OF THE PERFORMANCE EFFECT OF BANK RECAPITALIZATION POLICY IN NIGERIA

Dr. Walter Anuku * & Stella Madueme

Abstract

Financial performance and its role as a primary objective of a business organization is encapsulated in the measure of assets conversion to profitability. Financial performance measures such as Return on Assets (ROA) and Profit After Tax (PAT) signify the achievement of an essential organizational objective in a merger. As a result, this work examined the effect of mergers on the performance of money deposit banks in the Nigerian banking industry. Fourteen banks were selected; seven merged and seven non-merged banks. Secondary data were sourced from the banks' financial statements, covering 21 years from 2000 to 2020 pre and post-consolidation periods. Variables analyzed are: Return on Assets, customer deposits, fixed assets, customer loans, efficiency, and profit after tax. The judgmental sampling technique has been used in selecting the banks as a firm that has survived the consolidation policy of CBN. The banks are listed on the Nigerian stock exchange market, therefore enabling easy access to the financial reports, which are the major source of the secondary data. The Difference in Differences (DiD) model was used to ascertain the performance effect of mergers in the banking sector. Root test analysis shows the data was stationary at levels using Philips Peron. Difference-in-differences models estimate the effect of exposure by using changes over time in a treatment group relative to a control group. The study finds a non-significant Return on Assets (ROA) and a significant merger effect on profit.

Keywords: Merger, Bank reforms, Consolidation, Performance measures