‘Too Small to Succeed’ OR ‘Too Big to Fail’: How Much Does Size Matter in Bank Merger and Acquisition?

Abstract

Bank size remains a puzzle to the banking sectors, meaning whether banks can be ‘too small to succeed’ and ‘too big to fail’. This paper examined the relationship between bank sizes with merger and acquisition on operational performance and stability of the banking sectors. This paper employs panel data techniques (POLS, Fixed Effects & Random Effects) to analyze a set of samples for 24 banks involved in merger and acquisition during 2009Q1 to 2018Q3 from 6 countries. The results indicated that bank size shows significant impact on the operational performance and stability of 3 years pre & post-merger and acquisition. More specially, smaller banks have better merger and acquisition performance than larger and medium-sized banks, whilst larger and medium-sized banks outperformed bank stability. Hence, the bank size impacts merger and acquisition performance and bank stability. Policymakers and stakeholders get the proper hints for which size of banks are the more potential for merger and acquisition deals.