Effect Of Consolidation On Corporate Financial Performance

Effect Of Consolidation On Corporate Financial Performance

Abstract

In this exploration work named effect of connection on commercial fiscal performance of Nigerian banking sector. The experimenter examined the effect of total means on earnings per share of Nigerian banks. The effect of total deposit on earnings per share of Nigerian banks. And the effect number of branches of Nigerian banks on earnings per share of the banks. Data for the study was sourced through the periodic report of the named banks( Access bank plc and Guarantee Trust bank plc) and journal papers related to the subjects matter. Eview was used in the data analysis. The result revealed that the observed distribution for Earning per share, value( EPS), Total means( TOASSETS), Total Deposit( TODEPOSIT) and figures of Branches( BRA) have skewness portions of-0.142797,-1.021034,-1.046997 and-0.306628 independently. This is an suggestion that TOASSETS and TODEPOSIT has a constantly distribution that isn’t a normal bone . The table further indicates that the Kurtosis measure for EPS, TOASSETS, TODEPOSIT and BRA are1.384315,2.745141,2.692382 and1.797293 independently. There are to same extent within range of normalcy except TOASSETS and TODEPOSIT. The recrimination of these findings is that the frequence distribution of EPS and BRA are to a large extent typically distributed. The significant measure of Jargue- Bera statistics is an suggestion that the frequence distributions of the series aren’t normal. Table 1 indicates that EPS, TOASSETS, TODEPOSIT and BRA have reported p- value of0.755469,0.643299,0.627126 and0.827081 independently. The recrimination of the findings is that the frequence distribution of EPS, TOASSETS, TODEPOSIT and BRA wasn’t normal. This confirms our earlier position. When skewness and kurtosis were applied for test of normal distribution except TOASSETS and TODEPOSIT. It was also observed that total means influences the earnings per share of Nigerian banks. Total deposit has significant effect on the earnings per share of Nigerian banks. It was also observed that number of branches of Nigerian banks influences the earnings per share of the banks. Grounded on the findings the experimenter recommends that The superintendences of banks should work hard to insure that acceptable measures had been put in place to determine the functional/ intermediation effectiveness of their banks so that effective and effective utilisation of coffers would be maintained. The Nigerian banking controllers should endeavour to determine the implicit issues of any reform, constitution, and regulation before it’s made obligatory to the banks to misbehave with. This is because some reforms might not be salutary. The operation and staff of banks should estimate the introductory sources of banks ’ profitability.

Chapter One

Preface

Background of the study

connection in the banking system is a global miracle, which is said to have started in advanced husbandry. Notable exemplifications of countries passing a surge of combinations and connections in the banking assiduity in recent times are the United States of America( USA) and Japan( Hall, 1999). According to Kwan( 2004), since the enactment of the Riegle- Neal Act, which allows interstate branch banking beginning from 1997, the Number of large bank combinations in the USA has increased significantly. moment, theU.S.banking sector is reported to be in good shape, with record gains and fairly low Volumes of problem loans.

farther exploration on mega combinations in the USA suggests that intermingled banks endured advanced profit effectiveness from increased earnings than individual banks, due to the fact that they give guests with high value added Products and services( Akhavin, Allen, Berger, David and Humphrey 1997).

Historically, the Nigeria banking assiduity has experienced four stages of development phases. The first stage could be described as the unguided liaises fair phase 1930 to 1958, during which several inadequately subsidized and unsupervised indigenous bank failed before their tenth anniversary. The alternate stage was the control governance 1960 to 1985, during which the central bank of Nigeria assured that only fit and proper banks were granted a license. The time 1986 witnessed tremendous change in the nation’s fiscal geography.

This was as a result of the profitable reforms embodied in the structural adaptation programmed( SAP) that marked the preface and inception of neoliberal gospel of free entry from being in operation which was over stretched and banking license were apportion by the political authorities on the base of patronage. This reform still, led to the growth in terms of number of banks, branches, product creativity and the position of operation of Nigerian banks. This was the third phase which was appertained to as thepost-SAP, the control governance 1986 to 2004( Ekezie, 1997).

still, from 1987 to 1989, there were series of oscillations endured in the foreign exchange request and bigwig abuses in the Nigerian banking assiduity. The end result was the massive close down of banks that began to set in substantially due to poor commercial governance non- compliance with regulations, weak operation and declining gains, capital effectiveness, bankruptcy, high prevalence of nonperforming loans poor asset quality, and over reliance on foreign exchange request for income through round tripping of officially sourced foreign exchange( Yakubu, 2008). hence the need for a reform in the banking system.

Combinations and Acquisition which are divisions of connection are commonplace in advanced countries of the world but are just getting prominent in Nigeria especially in the banking assiduity. Before the recent connection, the Nigerian banks hadn’t completely embraced combinations and accessions as anticipated because of their artistic background in terms of asset power, covetousness, shame, fear of what people will say and lack of proficiency needed for combinations and accessions, among other reasons. The issue of combinations and accessions in banking assiduity started in October, 2003 under the once chairman of CBN( Charles Soludo). The CBN rolled out impulses to encourage weaker banks borrow combinations and accessions. The impulses included concessionary cash reserve rate for a period of two times to the recently restructured banks, conversion of overblown positions of weak banks to long- term loans

with concessionary interest and the acquired banks could be given up to 24 months grace period for complying with the minimal liquidity rate demand to enable it settle down as a recently recapitalized restructured bank.

Though, utmost of the delicate banks were unintentional to misbehave until the new order on July 6, 2004( Famakinwa et al, 2004). The situation changed from July 6, 2004 as numerous banks had either intermingled with or acquired other banks.

The increase in mindfulness and scheme is due to a number of reasons similar as trouble of torture, nonsupervisory driven terrain, foreign persuading, persuasion from nonsupervisory bodies and profitable benefits of combinations and accessions. The most common of these factors that’s responsible for the growth of combinations and accession in Nigerian Banks is nonsupervisory factor. therefore, combinations and accessions as connection tools have come a near endless point of our fiscal system after July 6, 2004( Ewubare, 2004). The policy of 25 billion naira minimal capital base forced banks to go into junction and or acquire one another as a strategy to meet the demand. Part of the broad objects of connection anticipated include enhancement of profitability and effectiveness of the banks in terms of operations and finance.

Statement of the Problem

The need for a strong, dependable and feasible banking system in Nigeria is under scored by the fact that the assiduity is one of the many sectors in which the shareholders ’ Fund is only a small proportion of the arrears of the enterprise. It is, thus, not surprising that the banking assiduity is one of the most regulated

sectors in any frugality. It’s against this background that the Central Bank of Nigeria, in the maiden address of its once Governor,Prof. Charles Soludo, outlined the first phase of its banking sector reforms designed to insure a diversified, strong and dependable banking assiduity. The major ideal of the reforms is to insure and guarantee an effective and sound fiscal system. therefore, the reforms were designed to enable the banking system develop the needed adaptability to support the profitable development of the nation by efficiently performing its functions as the medium of fiscal intermediation( Lemo, 2005). Also, these reforms were to insure the safety of depositors ’ plutocrat, position banks to play active experimental places in the Nigerian frugality, and come major players in thesub-regional, indigenous and global fiscal requests.

Objects Of The Study

The end of this exploration work is to examine the effect of connection on commercial fiscal performance of Nigerian banking sector. The specific objects of this exploration work includes the following;

1. To examine the effect of total means on earnings per share of Nigerian banks.

2. To ascertain the effect of total deposit on earnings per share of Nigerian banks.

3. To estimate the effect number of branches of Nigerian banks on earnings per share of the banks.

Exploration Questions

1. To what extent total means affect earnings per share of Nigerian banks?

2. To what extent does total deposit affect earnings per share of Nigerian banks?

3. To what extent number of branches of Nigerian banks affect earnings per share of the banks?