Corporate Governance and Performance of Financial Institutions: Case Study of Mergers and Acquisitions in Pakistan

Abstract

The present study analyzed the impact of board decisions on the performance of financial institutions after mergers and acquisitions. The data envelopment analysis technique analyzed the 11 mergers and acquisitions deals made in Pakistan's financial sector from 2002 to 2018. For analysis purposes, three years post mergers and acquisition data were collected. The data analysis is made in two stages. In the first stage, the efficiency score is computed by excluding the corporate governance variables. In the second stage, the efficiency score is calculated using corporate governance variables, and the results are compared. The merged commercial banks attained technical and scale efficiency after mergers and acquisitions with the change of code of corporate governance practices. However, the pure efficiency of merged commercial banks in Pakistan is insignificant. The study's results significantly contribute to the economic shock theory, and all M&As are categorized as forced legislative mergers.