Forced mergers on bank efficiency and productivity: evidence from semi-parametric Malmquist productivity index

• Main Authors: Sufian, Fadzlan, Kamarudin, Fakarudin
• Format: Article
• Language: English
• Published: SAGE Publications 2017
• Online Access: http://psasir.upm.edu.my/id/eprint/56406/1/Forced%20mergers%20on%20bank%20efficiency%20and%20productivity%20evidence%20from%20semi-parametric%20Malmquist%20productivity%20index.pdf; http://psasir.upm.edu.my/id/eprint/56406/; http://journals.sagepub.com/doi/abs/10.1177/0972150916666850
• Institution: Universiti Putra Malaysia

The paper examines the impact of mergers and acquisitions on the productivity of the Malaysian banking sector. The analysis consists of two stages. Firstly, the semi-parametric Malmquist productivity index (MPI) method is applied to a [-5, +8] window to examine the efficiency and productivity of the acquiring and target banks during the pre- and post-merger periods. Secondly, as suggested by Banker and Natarajan (2008), we employ a battery of parametric and non-parametric univariate tests to examine the difference in the efficiency and productivity of the Malaysian banking sector during the pre- and post-merger periods. We find that the Malaysian banking sector has exhibited a higher total factor productivity level during the post-merger period attributed to technological progress. The empirical findings do not provide conclusive evidence on the less productive banks becoming the target for acquisitions.