Impact of Merger and Acquisition on Dividend Pay-out Ratio of Nepalese Commercial Banks:

Annotated bibliography

Introduction:

Many studies have been done on mergers and acquisitions. Most of these studies have examined
the effects of the mergers or acquisitions in several companies in a single study.
For instance, Kithiku’s study examined the role of mergers and acquisitions on various
commercial banks in Kenya(Kithitu et al., n.d.). Studies of this kind have produced mixed
results; some have found that merging companies benefited from the merger whereas others
found that the mergers had no positive impact on the companies’ performance.

During the study of effects of mergers and acquisitions on returns on capital employed and
dividend per share of companies in Nigeria, (Udeh & Igwe, 2013) revealed that while only 20%
of the companies displayed increase in the return of capital, it was found during the study that
80% of the companies paid a higher dividend. This article demonstrates the prevailing nature of
the post M&A companies paying higher dividends to its shareholders to show they are doing
better after M&A. So, whether companies actually earn more by synergy and pay more
dividends or they simply give more dividends to show, we have to look at the dividend payout
ratio for a longer period.

Similarly, in another research where (Kwazhi et al., 2015) employed descriptive method to test if
there was significant difference between the pre and post merge share prices of the banks. The
study showed that there has been increase and consistent dividend payments to shareholders after
the merger and that the share prices of the selected banks have appreciated. And also while
examining the impact of post merger and acquisitions on value creation (Gupta et al., 2020)
empirically showed that lagged synergy influences future synergies positively, and mergers
create positive value for post-merger acquiring firms in India.

The inconsistent findings could be attributed to the fact that companies differ in many respects.
Previous studies have similarly failed to examine the characteristics of particular banks before
and after they merged. Consequently, all the literature available on this subject is conflicting and
too general. It is difficult to make concrete conclusions on the basis of the existing literature.
Therefore, there is a need for studies to be done on particular banks and the findings could be
generalized to other banks with comparable characteristics.
 References:
Gupta, I., Mishra, N., & Tripathy, N. (2020). The Impact of Merger and Acquisition on Value Creation:
An Empirical Evidence. Lecture Notes in Networks and Systems, 194 LNNS, 1435–1456.
https://doi.org/10.1007/978-3-030-69221-6_107
Kithitu, J., Cheluget, J., Keraro, V., Mokamba, J., & Kenyatta, J. (n.d.). Role of Mergers and
Acquisitions on the Performance of Commercial Banks in Kenya. 2.
Kwazhi, J. W., Ahmed, D., & Kumshe, M. (2015). Effects of Mergers and Acquisitions on Dividend
Payment and Share Prices of Selected Deposit Money Banks in Nigeria. Research Journal of
Finance and Accounting Www.Iiste.Org ISSN, 6(18). www.iiste.org
Udeh, S. N., & Igwe, N. N. (2013). Effects of Mergers and Acquisitions on Return on Capital Employed
and Dividend per Share Indices of Companies in Nigeria. International Journal of Business
Administration, 4(5). https://doi.org/10.5430/IJBA.V4N5P51