Impact of Nigeria’s bank consolidation

Abstract

The various financial sector reforms of the past two decades in Nigeria brought about some changes in terms of the number of institutions, ownership structure, as well as depth and breadth of the market. The recent reforms (2005) was a regulatory induced restructuring which engendered the alignment and realignment of banks to ensure sound, responsive, competitive and transparent banking system suited to the demands of the Nigerian economy and the challenges of globalization. A review of the literature suggests that the value gains alleged through expense reduction, increased market power, reduced earnings volatility, and economies of scale have not been verified. Khotari and Warner (2006) reinforced the use of the stratified samples to measure sample securities' mean and cumulative mean abnormal return around the time of an event. We used weekly average stock price on a short horizon to get statistically significant positive abnormal returns to shareholders of acquiring banks and insignificant (neutral) abnormal returns for target banks around the announcement date.