| dc.description.abstract | Mergers and acquisition refers to where two or more companies combine corporate
resources to operate as a unit with an aim of improving their performance. Previous study
on this topic give conflicting findings on how firms performance react to merger and
acquisition The objective of the study is to investigate the effects of merger and
acquisition on the financial performance of financial institutions in Kenya. The study
adopted a descriptive study design using event study model to analyse the relationship
existing between the accounting ratios (ROA and ROE) as measures of financial
performance. The study found that that merger and acquisition events results into either
increase or decrease in the financial performance. Abnormal financial performance was
calculated for the pre and post-merger period. The cumulative abnormal average return
(CAAR) for all the banks involved in the study found ROA to be 5.274, thus concluding
that merger and acquisition positively affect financial performance. However, the CAR
for ROE found -1.823 as a result of the variability of the extreme negative performance
of Equatorial Commercial bank. This leads to the conclusion that merger and acquisition
event results into an increase in financial performance of the companies. The study
recommends that management teams need to take advantage of the benefits of mergers
and acquisitions. However, analysis need to be done when choosing a firm to merge with
or a company to acquire in order to ensure that the merger exercise will add value to the
firm competitive advantage | en_US |
