Abstract:
Many merged companies face various operational challenges experienced at the early years of operations, these include: Information Technology, Human Resource, Communication and financial issues. The Financial issues rely on the maximization of the shareholders’ wealth. Most merging companies face various financial challenges. The purpose of this study was to assess merger and its influence on financial performance among commercial banks in Eldoret Town. It was guided by the following objectives: to establish the effect of horizontal mergers on financial performance of commercial banks in Eldoret Town, to assess the effect of vertical mergers on the financial performance of commercial banks in Eldoret Town and to determine the effect of market extension mergers on the financial performance of commercial banks in Eldoret Town. The study adopted survey research design and it was guided by the theory of efficiency, empire building theory and agency theory. The target population for the study was all 102 employees working in 4 merged commercial banks in Eldoret town. The banks to be considered in this study were those that merged during the period of 2005 to 2017. The study adopted a census technique. Questionnaires were used to collect data. To determine the reliability of research instruments a pilot study was conducted before the actual data collection and further split half method was carried out to calculate Cronbach alpha. A value of above 0.7 confirmed the reliability of the research instruments. The data was analyzed using both inferential (multiple regression and correlation) and descriptive statistics (frequencies, percentages, mean and standard deviation) and was presented by use of tables and charts. The study findings indicated that all the study variables were significant to financial performance (Horizontal mergers β=0.160, p value=0.032, Vertical mergers β =0.17, p value=0.005 and market extension mergers β=0.631 p value=0.000). The findings further indicated that the effect of the predictor variables (Market extension Merger, Horizontal Merger and Vertical Merger) explains 83.6% of the variations in financial performance of commercial banks in Eldoret town. Therefore it was concluded that merger is a predictor for financial performance of commercial banks. The study recommends that firms facing constraints on the market should consolidate their energies by resorting to merger/acquisition so as to expand their profitability as well regulators should further deploy non-market-based assessment tools that will help in assessing past performance of both companies intending to merge as a way of establishing possible reasonable for markets skepticism before and after the merger periods.
