Has Merger and Acquisition been considered as a method of dealing with weak banks? Evidence from the third bank restructuring process in Vietnam

  • Received December 24, 2018;
    Accepted February 12, 2019;
    Published April 2, 2019
  • Author(s)
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  • Article Info
    Volume 14 2019, Issue #1, pp. 193-210
  • Cited by
    2 articles

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This work is licensed under a Creative Commons Attribution 4.0 International License

In the third bank restructuring process in Vietnam during the 2011–2016 period, banking system experienced the participation of 14 commercial banks with 7 successful, both mandatory and voluntary, M&A deals. This research tries to answer if M&A was a good method of dealing with weak banks as Vietnam expected. Firstly, the article evaluates M&A activities’ effects on business results of acquiring banks through three financial ratios (including return on asset (ROA), return on equity (ROE) and net interest margin (NIM) by using paired sample T-Test. The results show that M&A activities only have positive effects on ROA of acquiring banks in Vietnam, while impacts of M&A activities on ROE and NIM are not clear. Secondly, by using a fuzzy TOPSIS approach based on Balanced Scorecard, the research shows that the performance of acquiring banks in mandatory M&A deals are not good as compared to the other acquiring banks. In fact, M&A deal only has strongly positive effects on acquiring bank performance, when it is totally based on real demands of both target and acquiring banks as well as created synergy. Therefore, to deal with weak banks in the next time period, Vietnamese banking system should focus on other market solutions in addition to keeping the nature of M&A activities and improving its efficiency.

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    • Figure 1. Research model
    • Figure 2. ROA of acquiring banks from three years before and three years after M&A
    • Figure D1. Total assets of six acquiring banks from 2010 to 2017 (million VND)
    • Figure D2. Profit after tax of six acquiring banks from 2010 to 2017 (million VND)
    • Table 1. Indicators measuring bank performance
    • Table 2. Indicators measuring financial bank performance and M&A impacts
    • Table 3. Research results about impacts of M&A on the banking system and acquiring banks
    • Table 4. Fuzzy scale used in this research
    • Table 5. Results of paired samples T-test
    • Table 6. Fuzzy weights of BSC performance evaluation index by Fuzzy Topsis
    • Table 7. The closeness coefficient for each alternative and the descending order of acquiring banks
    • Table A1. M&A deals in Vietnam from 2011 to 2016
    • Table B1. List of commercial banks in Vietnam in 2016
    • Table C1. Charter capital, total assets, number of branches, number of offices and number of employees in acquiring banks from 2010 to 2017
    • Table D1. The weighted normalized fuzzy decision matrix
    • Table E1. Fuzzy Positive Ideal Solution (FPIS – A+) and Fuzzy Negative Ideal Solution (FNIS – A–
    • Table E2. The distance from each alternative Ai to the FPIS (and to the FNIS)