Impact of Merger on Performance of Indian Public Sector Bank: A Case Study of Global Trust Bank and Oriental Bank of Commerce

Abstract

The article tries to assess the impact of mergers and acquisitions on profitability and operating performance of Indian public sector bank in the Indian banking sector taking into consideration the case of merger of Global Trust Bank (GTB), Oriental bank of Commerce (OBC). Wilcoxon signed rank test for those variables like CDR, IDR, OOETE, NIIAWF, OPAWF where significant departure from normality assumption is noticed, suggests that there is no significant difference between the pre and the post-merger performance on the basis of CDR, IDR, OOETE, NIIAWF, OPAWF of the said bank. On the other hand, paired samples t test for other 12 variables where normality assumption is not violated, suggests that significant differences between pre and post M&A (CDR pre & CDR post),( OOETE pre & OOETE post) and ), (IDR pre & IDR post), (NIIAWFpre & NIIAWF post), (OPAWF pre & OPAWF post)  are found out. On the other hand, the means of other pre and post merger ratio values are not different significantly. On the basis of the results of granger causality test, we can conclude that there exist unidirectional causality between return on asset (ROA) and operating expenses to total expenses ratio (OOETE),  return on asset (ROA) and non interest income total income ( NIITI) respectively but not vice versa. Here, unidirectional causality runs from return on asset (ROA) to total expenses ratio(OOETE) and from  non interest income total income( NIITI) to return on asset (ROA).

Keywords: Merger, India, Global Trust Bank, Oriental bank of Commerce.