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Bank mergers have become a common phenomenon. Yet, one is not sure if all the
reasons behind such mergers and acquisitions are fully understood. The existing literature
on mergers deals mostly with macro and micro economic reasonsderegulation
and economies of scalewhile little is known about the expectations, characteristics, and
behavior patterns of owners, managers and other people involved in the decision process. There is
a need for understanding the non-economic reasons because managers act as agents for
the company or the owners, besides pursuing their own
personal interest.
Such personal interest appears to play a critical role in the mergers of
credit/mutual associations, for the unique corporate governance feature of mutual institutions permits
managers to maximize their own interest even at the expense of the stakeholders' interests. Which is
why, it is alleged that the managers of mutual institutions entertain even value-decreasing
mergers. Against this backdrop, the authors, Nobuyoshi Yamori and Kozo Harimaya, of the first
article"Do Managers of Mutual Institutions Choose Efficiency-Improving Mergers? The
Recent Experience of Japanese Credit Associations"have attempted to find evidence, if any,
that suggests that mutuals might choose value-decreasing mergers by focusing on the
efficiency effect of the mergers of Japanese Credit Associations. Using the data on mergers
between Japanese Credit Associations for the period 1999-2003 and applying the input-oriented
data envelopment analysis, the authors have found that the technical efficiencies of mutuals
involved in mergers are significantly lower just after the merger than the technical efficiencies of
non-mergers, which, of course, improved as the time passed. The study thus states that
Japanese mutual banks do not pursue personal interest at the cost of shareholders' interest.
The authors, Sunil Bhardwaj and Kaushik Bhattacharjee, of the next
article"Modeling Money Attitudes to Predict Loan Default"have made an attempt to identify the
underlying causes for the default behavior of bank borrowers. Their study, using the data of an MNC
bank from two metropolitan cities in India, reveals that personality traits, such as money
attitudes, power-prestige and anxiety, enhance the intention to use and the actual usage of credit
facilities. The same traits can also be used as predictors of loan default. The model developed, based
on these constructs by the authors, is found capable of predicting the loan repayment behavior
of prospective customers. The model, however, suffers from low sample size and hence is
of limited use. Nevertheless, it offers scope for further detailed investigations.
The authors, V K Shobana and G Shanthi, of the next article"Profitability of
Foreign Banks Operating in India: A Multi-Discriminant Model" have evaluated the profitability
of foreign banks operating in India using the data for the period from 1996-97 to 2004-05. Using
multi-discriminant function analysis, the authors have identified interest earned/total
assets and interest earned/total income as the important variables in differentiating the high
profitability bank groups from that of the low
profitability groups.
The author, Harsh Arora, of the next article"Effect of Size and Age on the
Performance of Indian Banks Under Different Ownership Forms"has carried out a study to find out
the relationship between the growth performance of banks in India and their size and age. He
has also studied the equality of performance of all the three categories of bankspublic,
private and foreign banks. The findings reveal that both the independent variables, namely, size
and age of the bank, have significant impact on the performance of the banks. The results of
the independent t-test relating to the equality of performance in all the three categories of
banks reveal that the performances are not same. The study, however, suffers from data
limitation and parameters limitation. Nevertheless, it throws open a wide canvas for future research.
In the next article"Paradigm Shift in E-Banking: Some Evidence from Indian
Banks"the author, R K Uppal, has assessed the productivity and profitability of various bank groups
in pre- and post-e-banking period using parameters such as deposit, credit, business,
expenditure, earnings, spread per employee, etc., and suggested strategies to enhance the productivity
and profitability in the IT era of globalized banking.
In the next article"An Analysis of the Efficiency of Private Sector Banks in
India"the authors, B S Bodla and Richa Verma Bajaj, have analyzed the efficiency of 29 private
sector banks with the data set from 1998-99 to 2005-06, using production approach of
Data Envelopment Analysis (DEA) technic. The findings reveal that the efficiency of private
sector banks during the study period was acceptable. The study also indicates that the output
variables such as deposits, advances and investments and input variables such as NPA to net
advances have adversely affected the performance of private sector banks.
In the next article"Potential for Mortgage Loan in India: A Survey Among the
Senior Citizens of Vadodara, Gujarat"the author, Vipin Desai has analyzed the perception of
senior citizens in Vadodara towards reverse mortgage loan scheme and assessed its business
potential. The survey indicates that there is scope for its marketing.
The authors, Nelson Lajuni, Bryan Lo Ching Wing and Mohd. Fahmi bin Ghazali, of
the last article"Bank Selection Criteria Employed by Customers in Labuan: A
Study"have scrutinized the bank selection criteria adopted by Labuanese, using seven parameters such
as bank's image, services offered, influences, incentives, security, conveniences and the level
of technology, by framing a suitable questionnaire. The findings reveal that the customers
are eager to choose the banks that promise efficiency and offer a variety of services and
good network of ATMs, with a strong brand name.
-- GRK Murty
Consulting Editor |
