A study on The Factors Affecting Merger and Acquisition Decision In Nepalese Banking Sector

Abstract

The main purpose of this study is to find out the factors that would lead to making decision regarding going for merger and acquisition among the banks in Nepalese banking sector. This thesis finds out various factors that would affect merger and acquisition decision in banking sector based upon previous studies, and tries to check whether these are significant in case of Nepalese banking sector or not. Four theories: neo-classical, agency, behavioral and resource dependency; have been taken into consideration for purpose of finding out factors affecting decision to go for merger and acquisition. Based upon the previous studies done by various scholars, nine factors along with their corresponding hypothesis have been used for study. The nine factors are: emphasis on increasing income, emphasis on increasing sales of services, emphasis on financial diversification, emphasis on cost efficiency, emphasis on obtaining stronger position in market, emphasis on better branding, emphasis on achieving security, emphasis on fulfilling regulations requirement from regulatory authorities and emphasis on fulfilling capital requirement. 200 completely filled questionnaires (out of 250) were collected from the informants for the purpose of data analysis. Similarly, Statistical Packages for Social Sciences (SPSS) was used for the purpose of data analysis such as reliability analysis, factor analysis, descriptive analysis, correlation and regression analysis. The results of the analysis illustrated that out of nine factors; emphasis on providing service, emphasis on cost efficiency and emphasis on fulfilling capital requirement had significant positive relationship with decision to go for merger and acquisition while emphasis on better branding had significant negative relationship with merger and acquisition decision. This research is useful for banking sector to consider whether taking merger and acquisition decision or not. Similarly, the policymakers can help in making policies and rules to influence the frequency of merger and acquisition based upon this research. In the same way, this research is useful for other sectors too if they consider making merger and acquisition decision.

Key words: merger, acquisition, SPSS, neo-classical, agency, behavioral, resource dependency, income, cost, position, branding, security, regulations, capital, reliability analysis, factor analysis, descriptive analysis, correlation, regression analysis, decision