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Impact of Nigeria’s Bank Recapitalization on Shareholder’s
By: osagie Joseph
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) prompted regulatory induced restructuring
and engendered the alignment and realignment of banks and banking groups into the merger
of some and the acquisition of others to ensure a 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 that are alleged through expense
reduction, increased market power, reduced earnings volatility, and economies of scale have
not been verified. We attempt to address alternative explanations and reconcile the data of
continued merger activity with event study methods which measures sample securities' mean
and cumulative mean abnormal return around the time of an event. Khotari and Warner
(2006) reinforced the use of the stratified samples to examine event study statistical properties
adopted for the Nigerian banking post consolidation and illustrates that the property of the
study methods varies by calendar time period and the event sample firm characteristics such
as volatility. The long-horizon method posed great challenge by its high susceptibility to
joint-test problem therefore we used weekly average stock price derived from Securities and
Exchange Commission's for a short horizon to get precise measurement of abnormal returns
and more information of announcement effects.
The study was designed to examine the effect of bank consolidation on wealth returns of
acquiring banks shareholders during, before and after...
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