A Study on Evaluating the Impact of Mergers on the Financial and Stock Performance of Selected Acquired Banks

DOI: https://doie.org/10.10399/APER.2025824099

Authors:

Dr.K. S.Harish , Dr.N.C.Rajyalakshmi , Kiranmayi.P , Ch. Varun Kumar

Keywords:

Mergers, Stock Performance, Acquired Banks, EAGLE framework, financial Performance

Abstract:

This study investigates the impact of mergers on the financial and stock performance of six major public sector banks in India: State Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank, Union Bank of India, and Indian Bank. Using the EAGLE framework—which evaluates Earnings, Asset quality, Growth, Liquidity, and Equity—the study assesses changes in key financial metrics before and after mergers. Stock performance was also analysed using return-based and risk-based indicators, including average daily returns, annualized returns, beta, and volatility.

The findings reveal a mixed yet generally positive impact of mergers. While improvements were observed in profitability, asset quality, and capital adequacy ratios for most banks, changes in metrics like Return on Assets and Net Interest Margin were not uniformly statistically significant. Notably, interest income ratios showed a decline across several banks, suggesting a shift toward non-interest income or more cautious lending strategies. On the stock performance front, all six banks recorded significant improvements in both average daily and annualized returns post-merger, with Union Bank, Canara Bank, and Indian Bank showing the most pronounced gains.

Overall, the study concludes that mergers have contributed to strengthening the financial health, efficiency, and market performance of the acquiring banks. However, the extent of the benefits varied by institution, underscoring the importance of strategic fit, integration planning, and risk management in realizing post-merger gains. These insights offer valuable implications for policymakers, investors, and banking executives considering consolidation as a tool for sectoral reform and competitiveness.

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