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Electronic AGC FORM (PROPOSAL)

SECTION 1: STUDENT TO COMPLETENAME:

ABORODE AderemiI.D. No:

079019717ENROLMENT/START DATE (/!!):

05/2008

PROGRAMME:

MSc FinanceMODULE:T"E PROPOSAL

DATE SU#MITTED LOCAL RESOURCE CENTREDD/MM/YYYY Leadmode Cons!" L"d# $i%eria

STUDENT DECLARATION: In $%&ittin' or to t*e Uni+er$it! !o% ,re ,'reein' to t*e -olloin' $t,teent:&' dec!are "(a" "(is assi%nmen" is m) o*n *or+# "(a" a!! sorces o, re,erence are ac+no*!ed%ed in ,!! and "(a" i" (as no" -een s-mi""ed ,or an) o"(er

corse&.

SECTION : TUTORS COMMENTS

Ability to constructa project with clear,coherent and welldefended research

questions/objectives

Discussion of therelation betweenyour proposedresearch and

previous research

Discussion andjustification of

proposed methods

O+er,ll Coent$:

Secon0 M,rer A00ition,l Coent$ (Optional):

SECTION : TUTORS COMMENTS 2 Et*ic,l Re+ie Proce$$:

Ethics ApprovalDecision Route:Delete as appropriate!

1. $one Reired s"den" no" doin% researc( on !ie (man s-ec"s32. A"oma"ic4. Commi""ee Sc(oo!6 Fac!")6 niersi")6

Does this "roject haveEthics Approval#Delete as appropriate!

1. Yes2. $o

Commen"

T%tor ,rin' t*i$ ,$$i'nent D,te o- ,rin' M,r A,r0e0 (3) Gr,0e A,r0e0


2/16


3/16

STUDENT NAME: ABORODE Aderemi Olugbemiga

STUDENY NUMBER: 079019717

PROGRAMME OF STUDY: M S! i" Fi"a"!e

#ENTRE: $eadm%de

&NTA'E: Ma() *00+

SUPER,&SOR-FORUM: Dr # B T.e- Bla!/b%ard

T&T$E :

ASSESS&NG TE &MPA#T OF MERGER AND A#U&S&T&ON ON

#ORPORATE PERFORMAN#E OF #OMMER#&A$ BAN'S &N N&GER&A


4/16

ABSTRA#T

Merger and Acquisition (hereinafter interchangeably used as consolidation) is one of the

restructuring tools available to corporate organizations. For such exercise to be adjudged successful,

positive ipacts ust be felt through iproveent in certain perforance indicators of such

organizations after the erger. !f recent, ban"ing industry in #igeria has experienced an

unprecedented level of consolidation on the notion that gains can accrue through .!ale a"d .!%2e

e!%"%mie.) i"!rea.ed mar/e3 2%4er) e52e".e redu!3i%") redu!ed ear"i"g. 6%la3ili3( e3! , $hich$ill iprove the perforance of the ban"s in the post%erger era. &he ai of this research $or" is

to assess the ipact of erger and acquisition on corporate perforance of 'oercial ban"s in

#igeria. &he study $ill rely on secondary data fro libraries, 'entral an" of #igeria ('#)

Annual and uarterly *eports, #igerian +eposit and nsurance 'oission (#+') quarterly

reports, -orld an" +evelopent *esearch reports, as $ell as Annual reports of the selected an"s

in #igeria. re%erger and post%erger financial stateents of the selected ban"s $ill be analyzed

through descriptive statistics and ratios, $ith a vie$ to ascertain any iproveent or other$ise on

soe "ey perforance indicators after ergers. /iple regression analysis to copare the pre%

erger and post%erger results $ill also be eployed.

&NTRODU#T&ON

&he fundaental question of this research is0 3% 4a3 e53e"3 a. merger a"d a!8ui.i3i%"

im2a!3ed %" 3e 2er%rma"!e % #%mmer!ial Ba"/. i" Nigeria1.&he offshoots of this question

are0

(i) &o $hat extent has Ear"i"g. a"d Pr%i3abili3() A..e3 uali3() $i8uidi3() a"d #a2i3al

Ade8ua!(ipacted on post erger perforance of 'oercial an"s in #igeria1

(ii) -hat is the relationship bet$een the stoc" price and erger of 'oercial an"s in#igeria1

&he definitions of selected variables Ear"i"g. a"d Pr%i3abili3() A..e3 uali3() $i8uidi3() a"d

#a2i3al Ade8ua!(;are contained in A22e"di5 1. uite handful of researches has sho$n that the

inforation disseination of #igerian 'apital Mar"et is at its $ea" for. &herefore, changes in the

post erger stoc" price $ill be considered. Although various researches considered changes in

shares price as result of erger announceent but they are ajorly carried out in countries $here

the inforation disseination is at its strong for.

Aong reasons given for consolidation of an"s in #igeria is 2higher return to shareholders and

greater ipact on #igerian econoy3 /oludo (455604). &o achieve this goal aong others, the

perforance of an"s in #igeria in post%erger era ust be higher than that of pre%erger period.

&herefore, this research $hich serves as an assessent of an"s in post%erger era is iperative to

deterine the extent of the achieveent of this goal.


5/16

RE$AT&ON TO PRE,&OUS RESEAR#

Most research studies apply either accounting data to copare the pre%erger and post%erger

perforance of erged copanies or event study to analyzing erger benefits through evaluation

of the stoc" ar"et reaction to erger announceents. *ecently, correlation bet$een changes in

accounting data and abnoral returns is being used. (illoff and /antoero0 7889).

:ealy et al (7885) exained the post%erger operating perforance of ;. /.A erged firsbet$een 785) largest ergers during the period. t $as found

out 2that erged firs have significant iproveent in asset productivity relative to their industries

after the erger, leading to higher post%erger operating cash flo$ returns3 (788504). &his is

contrary to previous researches carried out by *avenscraft and /cherer (789


6/16

PROPOSED METODS

&his study $ill be based on docuents gathering approach $hich is ajorly secondary data

collection ethod. According to laxter et al (4557), 2using docuents can be a relatively

unobtrusive for of research, one $hich does not necessarily require you to approach respondents

first hand3.

'onsidering dearth of tie, due to cobination of studies and $or"ing, docuent gathering isconsidered as tie saving approach Maduabu (7888), #$abuo"ei (789D). ;nli"e intervie$s,

questionnaires and observations, a docuent gathering ethod does not need contact $ith the

authors. t is also less costly and ore convenient $hen copared $ith other priary data

collection"eag$u (7889). &his is necessary considering the ipact of global financial eltdo$n.

?ibraries, electronic sources such as usiness /ource reier and oogle /cholar, boo"s, reports

and -ebages $ill be consulted for the purpose of literature revie$. +ata $ill be collected fro

various regulatory authorities and ban"s in #igeria. *atio Analysis and /iple *egression Analysis

(through the help of /// 7>.5 $indo$ and Bxcel) $ill be adopted for the purpose of analysis.

For the purpose of accounting ratios, pre%erger accounting data (for 4556 and 455>) of the ban"s that ade up the erger $ill be averaged and copare $ith the average of post%erger

accounting data of the 46 surviving ban"s bet$een 455D and 455 eb3

-here Rb3(+ependent variable) is the average return of ban"s shares at tie 3, Rm3(ndependent

variable) is the actual return of the ar"et at tie 3, eb3is the residual ter of the ban"s shares in the

period 3@ and a3, b3are intercept and slope of the ar"et odel regression $hich $ill be estiated

by eans of ordinary least squares (!?/).

Rb3 and Rm3$ill be gotten fro using :olding eriod Gield (:G)0

Rb3= Pb3? Pb3@1> Db3;- Pb3@1

Rm3= Pm3? Pm3@1 ;- Pm3@1

-here Pb3, Pm3are the average daily price of the ban"sH shares and daily price of the ar"et@ Pb3@1, Pm3@1 are the

average price of the ban"Hs shares in tie 3@1and price of the ar"et in tie 3@1and Db3is the average dividendreceived on the ban"sH shares at tie 3


7/16

REF$E#T&ONS

rior to +eceber 455>, the deadline for eeting the #4>billion /hareholders fund, ($hich $as

previously #4billion) through injection of additional funds or erger and acquisition, there $ere

eighty nine (98) an"s in #igeria. &his exercise led to 4> surviving ban"s (t$o of $hich erged

after$ards). &his eans about D6 ban"s seized to exist by $ay of erger or liquidation. t is no$

>years after@ getting financial data of these ban"s $ill be an intricate tas". -hile it is not possible to

get these data directly fro these ban"s, regulatory authorities such as 'entral an" of #igeria,#igeria +eposit and nsurance 'oission etc are contacted $ith a vie$ of retrieving the data of

these ban"s fro their archives. t is quite disturbing and discouraging considering the level of

reluctance fro these authorities to volunteer these data. :o$ever, soe rating agents and stoc"

bro"ing firs in #igeria have been contacted $ho gave the clue that soe of these data could be

purchased. 'onsidering the nuber of an"s involved, it $ill cost considerable aount to obtain

these data.

Apart fro the availability and associated cost of obtaining the requisite data, there is inherent

proble of the result of this study to be 2subject to3 financial data gathered. &hese financial data

$ere originally prepared by various ban"s $hich ight have been subjected to various financial

shenanigans (creative accounting as it is coined) $hich have to be ta"en 2as they are3 $ith thebelieve that regulatory authorities ought to have prevented this to the barest iniu.

&he proposed adoption of ratio analysis has its inherent challenges. Analysis $ill be on various

ban"s $hich ight have applied different accounting ethods (e.g depreciation, stoc" valuation,

revaluation etc).

&he proposed adoption of regression analysis ight generate issues on violation of soe

assuptions of regression such as, "%"li"eari3() "%"@"%rmali3() e3er%.!eda3i!i3() .erial

!%rrela3i%" a"d mul3i!%lli"eari3(. !ther issues $ith respect to saple collection such as da3a

mi"i"g) .am2le .ele!3i%" bia.) l%%/@aead bia. a"d 3ime@2eri%d bia. $ill be another challenge

envisaged in the course of this study. /oe of these violations $ill be tested in the course of thestudy and appropriate decision ta"en along the line.

'onsidering the cobination of $or"ing and studies, it is pertinent to note that tie $ill be one of

the constraints to this study. n order to forestall any negative consequence of tie constraint, the

study is started earlier as a copensating approach for y tight schedule.

According to laxter et al (4557), coon ethical issues that ay be encountered in research

project are0 #%"ide"3iali3() A"%"(mi3() $egali3( a"d Pr%e..i%"ali.m 'onfidentiality ethical

issue $ill not arise as the data to be analyzed $ill be in totals and in averages of all the saples

collected. -here naes of ban"s are entioned specifically, no ethical issue $ill be inferred as it

$ill be based on facts $hich are public "no$ledge. As touching anonyity, this is li"ely to beviolated $hen using priary data collection ethod. &his study is based on secondary data

collection and the source of the dataIinforation ust be appropriately referenced. Fro the

professionalis perspective, concerted efforts $ill be ade to avoid bias judgents. &his $ill be

possible because quantitative ethods $ill be adopted in analysis. &he ethical issue on legality can

barely affect this study.


8/16

#ON#$US&ON

/ynergetic effect of any erger and acquisition ust be evident after the erger to conclude that

such exercise is a successful one. &he recent erger and acquisition that occurred in the an"ing

industry in #igeria is an exercise that needs concerted appraisal to deterine the level of its

success. &his study is aied to$ards assessing the ipact of erger and acquisition on corporate

perforance of 'oercial an"s in #igeria through the use of accounting data and event study

(ar"et odel).

Bfforts have been ade to gather the financial stateents of the existing 'oercial an"s in

#igeria. &he Financial /tateents of liquidated ban"s after +eceber, 455> $ill be needed for

coparison purpose. 'entral an" of #igeria ('#), #igerian +eposit and nsurance 'oission

(#+') $ill be contacted for these. &he #igeria /toc" Bxchange (#/B) $ill also be contacted for

the historical stoc" prices.

Above all, there is high expectation that the outcoe of this project $ill be of treendous

contribution to$ards the deterination of the level of success in the erger and acquisition exercise

of an"s recently carried out in #igeria

T&METAB$E.

TAS' DURAT&ON

/ubission of dissertation roposal Can 48, 4575

+ocuents search and +ata gathering Feb 7E Feb 4D, 4575

-riting of ?iterature *evie$ Feb 7 E Mar 7>, 4575

Further reading on ethodology, data

analysisIevaluation Feb 7> E Mar =7, 4575

*eceive of result of dissertation proposal Mar =7, 4575

Aendents to the project based on exainerHs

coent Apr 7 E Apr >, 4575

+ata Analysis and nterpretation Apr > E Apr 7>, 4575

*esearch $rite up Can 7> E Apr 7>, 4575

roof readingIFinal revie$ Apr 7D E May =5, 4575

roject /ubission May =7, 4575


9/16

REFEREN#ES

Achteyer, -. F. (7886) 2/trategic /ynergies0 Fact or Fiction13 n0 *oc", M. ?., *oc", *. :.,

/i"ora,M. The Mergers and Acquisitions Handbook(4nd edition), pp. 75) 2;sing +aily /toc" *eturns0 &he 'ase of Bvent /tudies3,

ourna! of Financia! Economics, 760=%=7

'able, C., . :olland (7888) 2*egression vs. non%regression odels of noral returns0

plications for event studies,3Economic "etters, D6 0 97%9>

'hatterjee, /., M. :. ?ubat"in, +. M. /ch$eiger, G. -eber (7884) 2'ultural differences and

shareholder value in related ergers0 ?in"ing equity and huan capital3 #trategic Management

ourna!, 7=0 =78%==6.

'ornett, M.M., :. &ehranian,(7884) 2'hanges in corporate perforance associated $ith ban"

acquisitions3,ourna! of Financia! Economics,=70477E4=6

+atta, +. ., C. :. rant., #. *ajagopalan (7887) 2Manageent incopatibility and post%

acquisition autonoy0 Bffects on acquisition perforance3 n . /hrivatsava (Bd.),Advances in

#trategic Management,07=%=8

Maduabu, M. A. (7888)Fundamenta!s of Education Research!nitsha0 'oon$ealth

Bducational ublishers


10/16

Mc-illias, A., +. /iegel (7888E(7)0 7>8


11/16

APPENDES

A22e"di5 1

DEF&N&T&ON OF ,AR&AB$ES-RAT&OS USED FOR ANA$YS&S OF BAN'S

PERFORMAN#E BETEEN *00C AND *007

,AR&AB$ES-RAT&O FORMU$AR DEF&N&T&ONS Ear"i"g. a"d Pr%i3abili3(

% *eturn on Assets

% *eturn on Bquity

% #et nterest Margin

@N&AT-TA;

%N&AT-E8ui3(;

@N&AT-G&;

&hese indicators easure the

overall perforance of the ban"s.

% et income after ta/es as a ercent of

book va!ue of tota! assets


book va!ue of tota! equit' caita0


book va!ue of $ross &ncome.

$i8uidi3(

% Average liquidity

% #et loan to Assets

% #et loan to +eposits

@$A-TD

@N$-TA

@N$-TD


ability of ban"s to eet their

obligations as and $hen due.

% This is the ratio of "iquid Assets to

Tota! 1eosit

% et !oan as a ercentage of Tota!

Assets

% et !oan as a ercentage of Tota!

1eosits

#a2i3al Ade8ua!(

% 'apital to Asset

% ?oan to Bquity

% +eposits to Bquity

@R#-TA

@T$-E8ui3(

@TD-E8ui3(


ban"sH capability to eet regulated

capital standards and still attract

loans and deposits.

% %rimar' 2Risk weighted3caita! as a

ercent of book va!ue of tota! assets

% Tota! !oans as a ercent of book va!ue

of equit' caita0

% Tota! deosits as a ercent of bookva!ue of equit' caita0

A..e3 uali3(

% #onperforing 'redit

to total 'redit

% #onperforing 'redit

to /hareholders Funds

@NP#-T#

@NP#-SF

&hese easure the quality of

credit of the ban"s.

% onerforming 4redit as a

ercentage of tota! 4redit

% onerforming 4redit as a

ercentage of #hareho!ders5 Fund


12/16

A22e"di5 *

$&ST OF BAN'S AFTER #ONSO$&DAT&ON AND TE MEMBERS OF TE GROUP

Ba"/ Name Member. % 3e Gr%u2

7 Access an" lc Marina an", 'apital an" nternational, Access an"

4 Afriban" lc Afriban" lc, Afriban" nternational ltd (Merchant an"ers)= +iaond an" lc +iaond an", ?ion an", African nternational an" (A)

6 Bcoan" Bco an"

> B& lc Bquatorial &rust an" (B&), +evco an"

D F'M lc F'M , 'o%operative +evelopent an", #ig%Aerican an",Midas an"

< Fidelity an" lc Fidelity an", F/, Manny an"

9 First an" lc F# plc, F# Merchant an", M'

8 First nland an" lc M, nland an", First Atlantic an", #;

75 uaranty &rust lc & an"

77 &'%'hartered an" lc *egent an", 'hartered an", &'

74 ntercontinental an" lc lobal an", Bquity an", ate$ay an", ntercontinental an"

7= # #igerian nternational an"

76 !ceanic an" lc !ceanic an", nOt &rust an"

7> latinu%:abib an" lc latinu an", :abib an"

7D /"ye an" lc rudent an", ond an", 'oop an", *eliance an", B

7< /pring an" lc uardian Bxpress an", 'itizens an", Fountain &rust an"!ega an", &rans%nternational an", A'

79 /tanbic an" ?td /tanbic an"

78 /tandard 'hartered an" ?td /tandard 'hartered an" ?td

45 /terling an" lc Magnu &rust an", #M an", #A? an", #M&rust an" of Africa

47 ;A lc /&, ;A, '&44 ;nion an" lc ;nion an", ;nion Merchant an", ;niversal &rust an",

road an"

4= ;nity an" lc #e$ Africa an", &ropical 'oercial an", 'entre%ointan", an" of the #orth, ##, First nterstate an", ntercity

an", /ociete ancaire, acific an"

46 -ea an" lc -ea an", #ational an"

4> Jenith nternational an" lc Jenith nternational an" lc

So"rce# $%& 'nn"al Report for the ear nded *1st +ecember, --.


13/16

$ei!e.3er U"i6er.i3( S!%%l % Ma"ageme"3

E3i!al Re6ie4 F%rm: Par3 1

S3ude"3 S3a3eme"3 &".er3 S3ude"3 A!3i%"

/tateent 7

have read the above inforation. confir that y research does notinvolve the study of live huanbeings.

Gou do not need to coplete art 4 ofthis for. Bthics approval is not

required.

/tateent 4

have read the above inforation.

confir that y research doesinvolve the study of live huanbeings.

lease proceed to coplete art 4 of this

for.

Gou are only required to fill in part 4 of this for if your research involves studying live huan

beings. n cases of autoatic ethics approval or $here no ethics approval is necessary please allo$

9%75 $ee"s fro receipt by the ;niversity for the return of your grade. n instances $here part = of

the Bthics For is copleted you should allo$ 9%76 $ee"s. Pr%2%.al. 3a3 are re!ei6ed 4i3%u33e !%m2le3ed E3i!al Re6ie4 F%rm 4ill be re3ur"ed 3% 3e .3ude"3 u"mar/ed


14/16

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15/16

School of Management

PLAGIARISM FORM (Student Assessed Work)This form should only be completed where a case of plagiarism (inc. poor scholarship) has beenidentified. It should be attached to the students submitted work that contains the plagiarised material.

PART 1 TO BE COMPLETED BY FIRST MARERStudent !"#e$Pro%r"##e o& Stud' Ye"r$Modue$

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16/16

School of Management

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