Effect of Mergers and Acquisitions on the Financial Performance of Commercial Banks in Kenya

The study focuses on the effects of merger and acquisition on the financial performance of financial institutions in Kenya. The study adopts a descriptive study design using event study model to analyse the relationship existing between the accounting ratios (EPS, ROA and ROE) as measures of financial performance. The study finds that that merger and acquisition events results into either increase or decrease in the financial performance. The significance test finds that the p-value for EPS, ROA and ROE and were 0.587, 0.069 and 0.597 respectively, all greater than 0.05 signifying that the financial performance deviated significantly from the means recorded before the merger. The cumulative abnormal mean performance of EPS, ROA and ROE to 0.167, 5.274 and -1.823 respectively, hence the study concludes that merger and acquisition positively affect financial performance of commercial banks. The negative ROE is attributed to the single extreme negative performance recorded by ECB. The study recommends that managers to consider taking the corporate action to take advantage of the benefits of mergers and acquisitions. Keywords: Mergers and Acquisition, Financial performance, Commercial Bank