1Assistant Professor, Department of Commerce, School of Commerce and Management, Central University of Rajasthan, Ajmer, Rajasthan, India
2Senior Research Fellow, Department of Commerce, School of Commerce and Management, Central University of Rajasthan, Ajmer, Rajasthan, India
JEL Classification: D61, G21, G34, L25
The present study seeks to investigate the effects of Mergers & Acquisitions (M&As) on the efficiency level of the merging units in the Indian banking sector. It intends to address the following research questions: Does the efficiency level of banks change after the merger event? What are the changes in efficiency scores of banks when the assumption of constant returns to scale is rejected? Do input prices contribute towards efficiency scores of merging banks? What do these variations in efficiency measures signify?
The study employs an input-oriented Data Envelopment Analysis (DEA) model with window approach to investigate the technical, pure technical, scale, allocative, and cost efficiencies of the Indian Scheduled Commercial Banks (SCBs) that merged during the period 2000–2018.
Although an overall conclusion of efficiency increase/decrease cannot be claimed, the results indicate a higher potential of merger-induced synergy in cases with low pre-merger efficiency levels.
The study provides a comprehensive and exhaustive efficiency analysis of M&As. An ordinal transformation of DEA efficiency scores enabled the derivation of several additional findings with respect to M&As in the Indian banking scenario. While the DEA efficiency scores provide an intensive reflection of the impact of past M&As in the Indian banking industry, the technique of ordinal transformation can be employed just as effectively in future studies, irrespective of the choice of industry or country.
Data Envelopment Analysis, Efficiency Measurement, Mergers and Acquisitions, India, Scheduled Commercial Banks
