Factors Necesitating Mergers and Acquisitions: The Case of Private Commercial Banks of Ethiopia
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Date
2022-02-08
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A.A.U.
Abstract
Despite recent developments every sector of the economy, Ethiopia remains naïve to the practice of M&A. There are no well documented M&A activities, if any. Previously, sufficient research is not conducted by scholars on M&A activities and factors that affect merger and acquisition on private commercial banks in Ethiopia. The objective of this study was to find out what factors do objectively trigger merger and acquisition of the private commercial banks of Ethiopia. The study is quantitative and primary data was collected using structured questionnaire. Explanatory research design was employed to conduct this study. Convenience (non-probability) sampling technique is used to select participants of the study. The result was analyzed and interpreted by applying inferential statistics. Since the questionnaire is Likert scale type the best way to analyze the data is linear regression. Multiple linear regression model is employed in this study. It was found that among the factors expected to necessitate merger and acquisition, the regression result showed that emphasis on operational cost reduction and increasing income necessitate mergers and acquisition. The factors emphasis on market expansion and emphasis on maintaining capital requirement are also found to necessitate merger and acquisition. The hypothesis emphasis on product diversification was not significant motivator of merger and acquisition. Banks which do not want either to merge or to be acquired, therefor need to increase their income, decrease operational costs, capture adequate share of the market and should raise their capital requirement set by the NBE.