Effects of mergers and acquisitions on the financial performance of commercial banks in Kenya
The objective of this research was to determine the effects of mergers and acquisitions on the financial performance of commercial banks in Kenya. Theoretically it is assumed that mergers improve company performance as a result of synergies acquired, market power, enhanced profitability and risk diversification. The research focused on the financial performance of commercial banks in Kenya which merged between 1999 and 2005. Comparative analysis of the bank's performance pre and post merger periods was conducted to establish whether mergers lead to improved financial performance. Secondary data from financial statements was collected for 5 years before and after the merger and analyzed with the aid of statistical tools. Descriptive research design was used where banks' performance was analyzed before and after the merger to determine whether there was any effect on the financial performance. The population used in this study was all the 36 Kenyan commercial banks that have undergone mergers. The study was the 16 commercial banks that have undergone mergers between 1999 and 2005.The study used mainly secondary data from the NSE, CBK, published facts and figures and reports for the period in study. The data was analyzed on the basis of the mean. The t-test was computed to test the null hypothesis. From the findings, the hypothesis that there was no improvement in financial performance after bank merger was therefore rejected. Thus the study found that there was improvement in financial performance after banks merger. The study also found that there was general increase in the profitability of the banks after merger and also increase in solvency and capital adequacy.