Value creation in Vietnamese bank mergers and acquisitions

Abstract

This chapter seeks evidence of the value creation associated with bank mergers and acquisitions in Vietnam. Accounting-based approach is used to test the value-maximizing hypothesis. 1-year pre-merger performance indicators of acquiring banks are directly compared to 3-year post-merger performance indicators of the consolidated banks to find out sources of value creation. This study finds that Vietnamese acquiring banks, 3 years after the mergers, can increase their deposit market share and credit market share but cannot increase their market power in the setting price. In terms of efficiency gains, this study finds strong evidence to show that the consolidated banks can improve their profitability measured by three measures: return on asset (ROA), return on equity (ROE), and net margin on assets. Except for the improvement in operating efficiency ratio, other efficiency measures are not statistically different from zero.