Measuring the effects of interest rate exposures on the level of bank merger activities in the Philippines: 2000-2006

• Main Authors: Barairo, Michelle, Dee, Annie Erika, Hizon, Jamie Lyn, Pascual, Karen
• Format: text
• Language: English
• Published: Animo Repository 2007
• Subjects: Interest rates; Banks mergers > Philippines; Consolidation and merger of corporations; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/14315
• Institution: De La Salle University

This study examines how interest rates and interest-rate exposures affect the level of acquisition activity, the identities of targets and acquirers, and the trend of interest rate changes in the Philippines from 2000-2006. We gathered data on PSE-listed banks involved in merger and acquisition activities in the Philippines within the period 2000-2006. Three statistical tools namely, correlation analysis, univariate, and multivariate tests were employed in evaluating each objective. Using correlation analysis and univariate tests to address the first objective, we find that banks' interest rate environment measures are negatively correlated with the level of their acquisition activities, indicating that interest rate measures and the level of acquisition activities move in the opposite direction, such that when measures of the interest rate environment increase, the level of acquisition activities decrease and vice versa. In determining if there exists a difference in acquirers and targets' interest rate exposures, we learned by employing multiple regression analysis that the difference between the two is statistically insignificant. Therefore, from a quantitative viewpoint, acquirers and targets have the same interest rate exposures. Finally, results in establishing the trend of interest rates in the Philippines from 1999-2006 demonstrate a falling interest rate environment for 10-year and 1-year MART rates.