The Strategic Decisions that Influenced Post Consolidation Performance of Banks in Nigeria

Abstract

The study examined the effect of strategic decisions on post consolidation performance of banks in Nigeria. Data for this study were sourced from secondary data and these were extracted from published audited financial reports of the 15 quoted Nigerian money deposit banks. Both descriptive and inferential statistics were used to analyze the data collected. The hypotheses formulated for the purpose of accomplishing the objectives of the study were tested with the use of Pearson Product Moment Correlation coefficient and panel data analysis that involves both the fixed and random effects analysis. Findings revealed that strategic decisions (capital structure and credit risk) positively influenced banks’ performance (return on equity) while strategic decisions (asset profile, operating efficiency and liquidity risk) negatively influenced banks’ performance. The findings also showed positive relationship (0.496 and 0.804 respectively) between strategic decisions (capital structure and credit risk) and banks’ performance while there was negative relationship (-0.831, -0.533 and -0.546 respectively) between strategic decisions (asset profile, operating efficiency and liquidity risk) and banks’ performance which was significant at P value < 0.01. The overall banks’ performance indicates a strong relationship (0.898) with the merger and acquisition embarked upon by the banks. The findings also revealed that the strategic decisions (capital structure and credit risk) designed to capture the effects of merger and acquisition on banks’ performance are statistically positive (0.120 and 0.262 respectively) while that of asset profile, operating efficiency and liquidity risk are statistically negative (-0.008, -0.196 and -0.170 respectively) which were significant at P value < 0.05. This implies that these five variables (asset profile, capital structure, operating efficiency, liquidity risk and credit risk) have significant effects on banks’ performance. We recommended that bank consolidation in the financial market must be market driven to allow for efficient process.

Keywords: Consolidation, Synergies, Strategic Decisions, Banks Performance.