Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Tuesday, June 19, 2012

Effect of Mergers and Acquisitions on Market Concentration and Interest Spread

Posted by D. Daniel Sokol

Mehwish Aziz Khan, Federal Urdu University of Arts, Science & Technology, Islamabad, Pakistan, Ferheen Kayani, COMSATS Institute of Information Technology, Islamabad, Pakistan and Attiya Javid, PIDE, Quaid-i-Azam University Campus, Islamabad, Pakistan describe the Effect of Mergers and Acquisitions on Market Concentration and Interest Spread.

ABSTRACT: This study investigates the relationship of mergers & acquisitions with the interest spread of the banking industry in Pakistan. To assess whether the merger of Pakistani banks were a success or otherwise, profitability, liquidity ratios, and net interest spread are computed which are considered essential to judge the financial performance of any bank. Data is taken for the period of 1997-2010 and this data have been used to calculate the interest spread and market concentration. Market Concentration is calculated by using Herfindahl-Hirschman Index or HHI. Findings show that the profitability and net interest spread of two merged banks declines as a result of mergers. It is also revealed that Concentration of the banking industry shows a rising trend during 2008 and 2009 after mergers occurred during 2007 as a result of merger. However, it shows the level that almost approaches the threshold i.e. 1000. One or two mo! re mergers can push up threshold level of HH index. It means that it is the right time for banking industry of Pakistan to be reviewed by any antitrust authority to maintain the optimum level of competition.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/06/effect-of-mergers-and-acquisitions-on-market-concentration-and-interest-spread-.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef016304d77ca1970d

Listed below are links to weblogs that reference Effect of Mergers and Acquisitions on Market Concentration and Interest Spread :

Comments

Post a comment