Effects of Mergers and Acquisitions on Dividend Payment and Share Prices of Selected Deposit Money Banks in Nigeria

Abstract

Firms adopt mergers and acquisitions as a strategy to enhance profitability, increase in share price and pay regular dividend to its shareholders. This study assessed the effect of mergers and acquisitions on dividend payment and share prices of selected deposit money banks in Nigeria. Data were generated from secondary sources such as annual financial reports of the banks, quarterly bulletin of the Nigeria Stock Exchange and Nigeria Bureau of Statistics. The data were divided into pre-and post-merger. The study employed descriptive statistics. Two hypotheses were developed for the study. The first hypothesis tested the relationship between profit after tax and dividend payments of the selected banks. Simple regression analysis was run to establish the relationship between the variables. The regression outcome revealed that UBA plc and Access banks showed significant relationship between the profit after tax and dividend payments. While Diamond bank plc and UBN plc showed no significant relationship between the variables. The second hypothesis tested if there was significant difference between the pre and post merge share prices of the banks. Independent Sample t test was used to test the hypothesis. The outcome of the test revealed that there was significant difference between before and after the merger. This was corroborated by the mean difference which has positive outcome.  The study further revealed that there was adverse impact of Global financial crisis on the performance of the banks, which led to depressed profits and other variables in 2008/2009 financial year. The study recommended the adoption of Mergers and Acquisitions as a strategy to salvage any banks that showed signs of depression and also implore Government to provide bailout funds to banks that requires it as the financial crisis has adversely affected the performance of banks.

Key words: Merger, Acquisition, Dividend Payment, Share Prices, Profit after tax