EFFECT OF MERGERS ON FINANCIAL PERFORMANCE OF LISTED COMMERCIAL BANKS IN KENYA AT NAIROBI SECURITIES EXCHANGE
MWATSUMA, JAMES MWARABU
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The purpose of this study was to examine the effect of Merger on the financial performance of listed commercial banks at Nairobi Security Exchange Kenya. The study seeks to address the following research hypothesis. The hypothesis used in this study were: -Merger Capital Adequacy does not have a positive effect on financial performance of listed commercial banks at Nairobi Security Exchange, Merger Liquidity Management does not have a positive effect on financial performance of listed commercial banks at Nairobi security Exchange, Merger Asset Structure does not have a positive effect on financial performance of listed commercial banks at Nairobi Security exchange, Merger Asset Quality does not have a positive effect on the financial performance of listed commercial banks at Nairobi security Exchange. A descriptive research design was used for a population of 13 merged commercial banks in Kenya from year 2010 to 2017. This design is appropriate for this research as it provides an accurate representation of situations and make inferences to the target population. This study targeted all the merged commercial banks in Kenya from 2010 to 2017. The study used Primary data through administered questionnaires and secondary data obtained from Nairobi security Exchange Handbook and Central Bank of Kenya’s website. This study used a descriptive and inferential statistics to establish the relationship between the four independent variables:- Merger Capital adequacy, Merger Liquidity Management, Merger Asset Structure and Merger asset Quality and Financial Performance being the dependent variables measured by:- Return on Assets and Return on Equity. Regression and correlation analyses was used and based on the association between two variables. The Statistical Package for Social Sciences version 21.0 was applied. 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 commercial banks merger. The study also found that there was general increase in the financial performance of the listed commercial banks after merger and also improvement on the Liquidity management policies, Asset Quality and merger capital adequacy. The study recommends that, those listed commercial banks in Kenya facing constraints on the market should consolidate their energies by resorting to merger so as to improve their financial performance as the merger is not just for the best interest of the managers but also shareholders. This generally leads to an increase in shareholders’ value as opposed to each commercial bank operating as separate entities.