"Assessing The Post-Merger Performance Of Indian Banks Through The Market Value Addition Model"

Abstract

This paper delves into the post-merger performance of selected Indian banks over a ten-year span from 2010 to 2020. The chosen duration aims to assess how these banks fared following mergers, a period marked by significant economic turmoil such as the Sub-Prime crisis. The crisis led to a drastic downturn in the US economy, causing over 64 banks to file for bankruptcy, including the fourth-largest banker globally, Lehman Brothers. Amidst this global financial crisis, the Indian banking industry remained resilient, witnessing healthy takeovers and mergers without a single bank facing liquidation. The paper employs the MVA (Market Value Added) model to evaluate the performance of these mergers and takeovers.

This study aims to understand the objectives behind mergers and acquisitions in the Indian banking sector while scrutinizing the financial performance of the merged entities using the MVA model. Fifteen mergers that occurred between 2010 and 2020 are analyzed. Through this analysis, it becomes evident that the MVA model provides a clearer depiction of the financial performance of a firm concerning the value added by the merged entity. Consequently, this analysis concludes that the MVA model stands out as a superior assessment tool compared to other models.