CHAPTER -3

RESEARCH METHODOLOGY

1.1 Introduction:
The world progresses through research, as new knowledge is created through research (Khawaja
Khalid, HaimHilman and Dileep Kumar M., 2012). Research is derived from the Latin word
which means ‘to know’. In other words research means to re-search (Sekaran, 2006). “Research
is a systematic inquiry aimed at providing information to solve managerial problems.”(Cooper
and Schindler, 2003). Research involves an eclectic blending of an enormous range of skills and
activities (Bryman and Bell, 2003). Research is based on primary and secondary sources, often
together with original data collected via research "instruments" (surveys, interviews,
questionnaires, "focus groups," etc.) to produce new knowledge on a particular topic (Saunders,
Lewis and Thornhill, 2009).In addition to primary sources and original instruments, secondary
sources are used to provide an overview of existing published knowledge on a topic, and possible
current debates about the topic (Walliman, 2005). The background provided by secondary
sources provide a contextual background and establishes how new knowledge described on paper
differs from what is already known (Cooper and Schindler, 2006). In order to conduct productive
research, one has to understand the specific methods used to conduct research, understand the
subject which is under study, and be able to understand and interpret the results (Sekaran and
Bougie, 2010; Walliman, 2005).

This implies, once the background for the research topic is established through literature review
with the knowledge gap identified, the next logical step is to draw a route map for answering the
research questions including the identified research proposition (Bruns, 2007). Therefore, this
chapter will discuss the research design, research objective, research hypothesis, research
methodology, data collection methods and statistical tools for analysis and interpretation.
(Bryman and Bell, 2003; Cooper and Schindler, 2003, 2006; Stuermer, 2009).

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3.2 Research Design:

A critical part of the research activity is to develop an effective research strategy or design
(Zikmund, 2000; Zikmund, Babin, Carr and Griffin, 2009) Research design provides a structure
for the collection, measurement and analysis of data (Saunders et al., 2009).

This research makes an attempt to evaluate the pre- merger versus post-merger performance of
public sector banks vis-à-vis private sector banks in India that have merged during the period
1993-1994 to 2004- 2005 by analyzing the variables elucidated in the CAMEL model.
“The research process can be presented in the form of a model which usually starts with a broad
area of interest, which is the initial problem that the study attempts to analyze.” (Zikmund,
2000).

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 CHART NO-3.1- RESEARCH DESIGN

Problem Problem
Discovery and discovery
Definition

Sampling Selection of Research

Selection of
technique
exploratory research

Pilot Probability Non-probability

Secondary Experience Case
(historical) survey study study

Data Collection of data (fieldwork)

Gathering
Problem definition
(Statement of Research
Data Editing &
Objectives)
Processing coding data
and analysis
Interpretation
Selection of Conclusions of Findings
research & Report
Methods

Report
Experiment Survey Secondary
Observation
Laboratory Field Interview Questionnaire Data Study

Source: (Zikmund, 2000)

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After the initial discovery and definition of the problem the research study has to focus on the
initial interest in the form of a specific question, which can be reasonably studied (Bwisa, 2008).
This might also involve formulation of a hypothesis or an assumption (Ohab, 2010). After the
formulation of the hypothesis, the research study engages in ‘observing’ the question of interest.
Having gathered the data, it can be analyzed in a variety of ways (Bryman and Bell, 2003).

The research study gets invaluable aid with the research design as it helps in the allocation of the
limited resources by posing choices such as: (Goodwin, 2005; Saunders et al., 2009; Sekaran and
Bougie, 2010)
 “Is the blueprint to include experiments, interviews, observation and the analysis of
records, simulation or some combination of these?
 Are the methods of data collection and the research station to be highly structured?
 Is an intensive study of a small sample more effective than an intensive study of a large
sample?
 Should the analysis be primarily quantitative or qualitative” (Bryman and Bell,2003;
Sekaran and Bougie,2010)

Research design needs a thorough analysis to ascertain the outcome of the project. In order to
carry out effective research, all the available methods should be considered, and only the most
appropriate method should be selected (Sekaran and Bougie, 2010). Each method has its own
pros and cons and a careful blending of one or more methods, can lead to generation of relevant
information, pertaining to the objective of the study. The sections ahead detail the research
methodology, the research model, the sampling plan, data collection (quantitative or qualitative)
that were used in the study and the statistical tools for analyses and interpretation.

3.2.1 Exploratory Research:

“Exploratory research is conducted to clarify the nature of ambiguous problem”, (Zikmund,
2000). “Exploratory research clears concepts, establishes priorities, develop operational
definitions, and improves final research design”, (Saunders et al., 2009; Sekaran and Bougie,

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2010). Exploratory research is often used to discover new ideas, consumer’s insight and hidden
motivations.” (Joppe, 2000).

In the present study, exploratory research was carried out in the initial stages to obtain adequate
information with the help of desk research. This was done to find out the data regarding those
mergers and acquisition deals that have been undertaken in the Indian banking sector during the
period under study, the motives and causes for these deals, the performance evaluation
techniques in Indian banks and the audited financial statements of the banks, so as to enable to
effectively complete the study. An important factor that aided in the collection of this data is the
fact that the retail banking industry in India is a very organized sector with detailed information
available through banking literature, annual audited financial statements and reports, and online
resource. Access to such information was also possible, with the cooperation of banking
executives, through in-depth interviews with officials of banks in the sample banks under study,
that were involved in the deal, that willingly assisted with important literature for the present
research. The main context of covering in-depth interviews is that the study can also bring the
perspectives of the banking professionals, on the reasons for acquisition by the acquirer banks.
The only limitation associated with the in-depth interviews was that it could not be conducted for
all sample acquirer bank involved and it was conducted only for banks where top executives
appointment could be sought, which is considered for the analysis.

3.2.2 Descriptive Research:

“Descriptive research seeks to determine the answers to who, what, when, where and how
questions”, (Zikmund, 2000). “Descriptive survey is concerned with identifying and counting
frequency of a specific population, either at one point in time or at various times for
comparison”, (Bryman and Bell, 2003). Descriptive statistical analysis for the present research
involved the following steps. First literature review was undertaken to identify the merger and
acquisition deals that were done during the period under study, thereafter literature review also
provided details on the various parameter influencing the performance of banks during the pre-
merger versus post-merger period. Next interviews were conducted with banking executives to
identify the impact of mergers and acquisition on the performance of the merged banks and also

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to certify about the various parameter influencing the performance of banks during the pre-
merger versus post-merger period that were identified through the literature review. Finally after
establishing the sampling procedure, the methods of data collection and analysis was determined.
The main purpose of using descriptive style of research design is that the data collected is very
concise and structured which makes the analysis factual and uncomplicated. The study has
collected data pertaining to Indian banking mergers and acquisition deals that have taken place
during the period 1993-1994 to 2004-2005. Nine banking merger and acquisition deals were
covered during the period under study. Out of these nine deals, seven deals are of public sector
bank acquirers and two deals are private sector banks acquirer. Analyzing these nine deals with
exploratory research is difficult and hence descriptive research design was used. The research
examined the impact of these mergers and acquisitions on the performance of the acquiring
banks during the pre-merger versus post-merger period and also analyzed the impact of mergers
and acquisitions on the post-merger performance of acquiring public sector banks vis-à-vis
acquiring private sector bank.

3.2.3 Causal Research:

“The main goal of causal research is to identify cause-and-effect relationships between
variables”, (Zikmund, 2000).
The present study did not aim to establish any cause and effect between variables and therefore
this method was not used for this study.

3.3 Statement of Problem:

Literature on mergers and acquisition in the Indian banking sector has shown that mergers and
acquisitions has emerged as the most preferable option for restructuring in Indian banks,
especially in the post liberalization period as a survival strategy. Under this backdrop the present

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study, aims to analyze whether mergers and acquisitions have contributed towards the
enhancement of performance of the banks. The primary objective of this research is to evaluate
the impact of mergers and acquisitions on the performance of the acquiring Indian public sector
banks and acquiring Indian private sector banks during the pre-merger versus post-merger period
by analyzing the variables explicated in the CAMEL model, with reference to bank mergers in
India during the period 1993-1994 to 2004-2005 and to study the impact of mergers and
acquisitions on the post-merger performance of acquiring public sector banks vis-à-vis acquiring
private sector bank by analyzing the variables explicated in the CAMEL model, with reference to
bank mergers in India during the period 1993-94 to 2004-2005.

During this period there was a mix of both public sector bank acquirers as well as private sector
bank acquirers as well as a blend of both voluntary as well as forced mergers and acquisitions.

It is proposed that the present research will be beneficial to the Indian banks and Indian banking
officials and banking regulators, as, the results and conclusions drawn could be used to evaluate
whether mergers and acquisitions in Indian banks have been an effective tool to improve the
performance of the acquiring Indian public sector banks and acquiring Indian private sector
banks and achieve the desired objectives set in the deal. The study will also enable the banking
officials to evaluate whether mergers and acquisitions can be an effective tool for improving
performance for both public sector banks as well as private sector banks and in both the cases of
forced acquisitions as well as voluntary acquisitions. The findings of this research could create a
base, as to whether mergers and acquisitions can be considered as a viable mechanism to
improve performance by both public sector banks as well as private sector banks, so that banks
can adapt this mechanism to positively influence their performance based on CAMEL
Parameters.

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3.4 The CAMEL Research Model:
The present study has been conducted by using the CAMEL Model parameters, the model for
performance evaluation of banks. S. Padmanabhan Committee (1995) recommended for Indian
banks, six rating factors viz. Capital Adequacy, Asset Quality, Management Efficiency, Earnings
Quality, Liquidity, Systems and Controls (i.e. CAMELS), and for Foreign banks, four rating

factors viz., Capital Adequacy, Asset Quality, Compliance, Systems and Controls (i.e. CACS) to
evaluate the banking performance. For applying the model five main dimensions of performance
(Capital adequacy, Assets Quality, Management Efficiency, Earning Quality and Liquidity) are
assessed. The pre-merger and post-merger performance of banks has been analyzed using these
five CAMEL Model parameters.

TABLE NO- 3.1: THE CAMEL MODEL REPRESENTATION

C Capital Adequacy i. Capital Adequacy Ratio,
ii. Debt Equity Ratio,
iii. Total Advances to Total Assets Ratio,
iv. Government Securities to Total Investment Ratio.
A Asset Quality i. Net Non-Performing Assets (NPA) to Net Advances
Ratio,
ii. Gross Non-Performing Assets to Net Advances
Ratio,
iii. Total Investments to Total Assets Ratio
M Management Efficiency i. Total Expenditure to Total Income Ratio,
ii. Total Advances to Total Deposits Ratio,
iii. Assets Turnover Ratio,
iv. Diversification Ratio,
v. Profit Per Employee,
vi. Business per Employee.
E Earnings Quality i. Net Profit Margin,
ii. Return on Equity,

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 iii. Net Interest Margin,
iv. Interest Spread,
v. Interest Income to Total Income Ratio.
L Liquidity i. Cash to Deposit Ratio,
ii. Government Securities to Total Assets Ratio,
iii. Total Investment to Total Deposit Ratio.
iv. Interest Expended to Interest Earned Ratio.

The five dimensions of CAMEL model can be used to evaluate the performance of banks as per
circular on CAMELS and CACS Rating Framework including components rating and composite
rating issued by Reserve Bank of India. (Gunsel N., 2007; Gyimah and Oscar, 2011; Loth, 2006;
Rasidah et al.,2008).

3.4.1 The CAMEL Variables:

I. Capital Adequacy:

Capital adequacy reflects the overall financial position of a bank and also the ability of the
management to meet the need for additional capital requirement. In a volatile economic
environment, capital is the only protection that any bank can have with them. By using their
capital, banks can honor their obligations even in a case of financial crisis or breakdown.
Therefore depositors are keen to know the risk perception of the bank. Capital adequacy decides
to a great extent that how well a bank can cope with the unexpected losses (Gunsel N., 2007).
The following relations will analyze the Capital Adequacy in banks.

i. Capital Adequacy Ratio.

CAR reflects the ability of a bank to deal with probable loan defaults. Capital Adequacy Ratiois
a measure of the bank’s core capital expressed as a percentage of its risk-weighted asset The RBI
guidelines stipulates Indian banks to maintain a CAR of minimum 9% for banks in India. It is
arrived at by dividing the Tier I and Tier II capital, by risk-weighted assets.

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Percent threshold varies from bank to bank (9% in this case, a common requirement for
regulators conforming to the Basel accords) is set by the national banking regulator of different
countries. The higher the CAR, the stronger the bank.

ii. Debt -Equity Ratio.

Debt-Equity Ratio is arrived at by dividing the total borrowings and deposits, with shareholders’
net worth, which includes equity capital and reserves and surplus. Company used debt than
equity because they can get tax benefit in paying the interest on debt, hence they would have
additional cash to generate higher return in their business. (Nissim and Penman, 2001). High
debt to equity ratio indicates high leverage and that the bank has been aggressively financing its
growth with debt.

iii. Total Advances to Total Assets Ratio.

This is the ratio of the Total Advances to Total Assets. Total Advances also include receivables.
The value of Total Assets excludes the revaluations of all the assets. It is a measure of a bank’s
aggressiveness in lending, which results in increasing the bank’s profitability.

iv. Government Securities to Total Investment Ratio.

This ratio measures the amount of risk free assets invested by a bank in government securities as
a percentage of the total investments held by the bank.

II. Asset Quality:

The term “Assets Quality” and its sound management, establish to a great extent, the degree of
growth and profitability of a bank and its financial strength. The prime dictum behind measuring
the assets quality is to ascertain the component of Non-Performing Assets (NPAs), as a
percentage of the total assets. This indicates what types of advances the bank has made to
generate interest income. This establishes that, quality of assets jeopardizes the earning capacity
of the bank. It also indicates, the quality of debtors, the bank has in its present financial
statements, as it depends on the quality of loans, which if given, to highly rated companies, the

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rates attracted are lower than that of lower rated doubtful companies. Thus asset quality indicates
the type of debtors of the bank. The following relationships are analyzed to gauge the Asset
Quality: (Gunsel N., 2007; Nimalathasan, 2008)

i. Net Non-Performing Assets to Net Advances Ratio.

The ratio portrays the quality of the asset class in the portfolio and also the extent of
deterioration of the quality of the asset portfolio. This dimension of CAMEL analysis
conveys the portfolio risk the bank is subjected to and the effects it could have on the overall
performance of the bank. Net NPAs are Gross NPAs net of provisions on NPAs and interest
in suspense account. In this ratio, Net NPAs are measured as a percentage of Net Advances.

ii. Gross Non-Performing Assets to Net Advances Ratio.

This is a measure of the quality of assets in a situation, where the management has not
provided for loss on NPAs. The Gross NPAs are measured as a percentage of Net Advances.
The lower the ratio, the better is the quality of advances.

iii. Total Investments to Total Assets Ratio.

Total investments to total assets indicate the extent of deployment of assets, in investment as
against advances. This ratio is used as a tool to measure the percentage of total assets locked up
in investments, which, by conventional definition, does not form part of the core income of a
bank. It is arrived at by dividing total investments by total assets. A higher ratio means that the
bank has conservatively kept a high cushion of investments to guard against NPAs.

III. Management Efficiency:

This parameter is used to appraise management efficiency so as to assign high value to better
quality banks and discount ill managed ones. Management efficiency of bank includes its
administrative aptitude to react in dissimilar circumstances. The term management efficiency
above all involves the capability of management in generating business and in maximizing
profits. To analyze the possible dynamics of management efficiency affecting the performance of

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the banks, the following ratios are calculated in the present study. (Gunsel N., 2007; Kaur, 2010;
Reddy and Prasad, 2009).

i. Total Expenditure to Total Income Ratio.

This ratio measures the percentage of operating income that is used towards meeting the
operating expenses of the bank. Smaller the percentage implies that the management is
efficiently managing the banks expenses, so that a larger proportion of operating income is
converted into profits after making due deductions for provisions.

ii. Total Advances to Total Deposits Ratio.

This ratio measures the efficiency of the management in converting the deposits available with
the bank (excluding other funds like equity capital, etc.) into high earning advances. Total
deposits include demand deposits, savings deposits; term deposits and deposits of other banks.
Total advances also include the receivables.

iii. Assets Turnover Ratio.

This measure indicates the total revenue earned for every rupee of assets that bank owns.

iv. Diversification Ratio.

This is a measure of banks income other than the interest income in the proportion of total
income of bank.

v. Profit per Employee.

This measure indicates the average profit generated per person employed by a bank. It measures
the efficiency of employees at the branch level. It also gives valuable inputs to assess the real
strength of a bank’s branch network. It is arrived at by dividing the Profit after Tax (PAT) earned
by the bank by the total number of employees (No. of EMPLOYEES). The higher the ratio,
higher is the efficiency of the management.

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 vi. Business per Employee.
This tool measures the efficiency of all the employees of a bank in generating business for the
bank. This indicates the efficiency of bank in terms of doing business with lesser number of
employees. It is arrived at by dividing the total income (INC) by total number of employees (No.
of EMPLOYEES). By business, we mean the sum of total deposits and total advances in a
particular year.

IV. Earnings Efficiency:

The quality of earning is a very important criterion that determines the ability of a bank to earn
consistently, even in the future. It basically determines the profitability of the bank. This
parameter lays importance on how a bank earns its profits. This also explains the sustainability
and growth in earnings in the future. This parameter gains importance in the light of the
argument that much of bank’s income is earned through non-core activities like investments,
treasury operation, and corporate advisory service etc. (Gunsel N., 2007).

Following six ratios are calculated for evaluating the earning quality of banks.

i. Net Profit Margin:

This is a significant parameter to appraise the earnings quality of a bank. A steady Net Profit
margin signifies that the bank has stable and steady earnings. Stakeholders look at net profit
margin thoroughly because it signifies the quality of earnings of the bank that is reflected in its
ability in converting revenue into profits available for shareholders. (Brigham and Houston,
2007).

ii. Return on Equity.

Return on equity (ROE) is defined as Profits after Tax (PAT) divided by common equity. ROE is
used to identify the shareholders’ return. This also indicates management’s performance
(Brigham and Houston, 2007). The higher the ROE means surplus funds can be invested to
improve banking business operations without having additional investment of capital from
shareholders (Graham, Zweig and Buffett, 2003).

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iii. Net Interest Margin.
This ratio is an important measure of a bank’s core income (income from lending operations). It
is defined as the difference between interest earned and interest expended as a proportion of
average total assets. Interest income includes dividend income. Interest expended includes
interest paid on deposits, loans from RBI, and other short-term and long-term loans. A higher
spread indicates better earnings given the total assets.

iv. Interest Spread.

This measure indicates how much the interest earning capability of the bank falls short or
exceeds its interest cost obligation. A large spread clearly indicates that the bank is profitable as
against a small spread that indicates otherwise.

iv. Interest Income to Total Income Ratio.

Interest income is a basic source of revenue for banks. The interest income to total income
indicates the ability of the bank in generating income from its lending. This ratio measures the
income from lending operations as a percentage of the total income generated by the bank in a
year. Interest income includes income on advances, interest on deposits with the Reserve Bank of
India and dividend income. It indicates the ability of the bank in generating income from its
lending.

V. Liquidity:

Liquidity is very important for any organization dealing with money. Liquidity is the bank’s
capacity to meet its short term obligations as well as loan commitments. Liquidity is most
imperative factor especially in banking sector as banks are considered as liquidity initiator in
the market. For a bank, liquidity is a critical aspect which represents its ability to meet its
financial obligations. It is of utmost importance for a bank to maintain correct level of
liquidity, which will otherwise lead to declined earnings. Amongst bank’s assets, cash
investments are the most liquid. A high liquidity ratio indicates that the bank is highly

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 prosperous. Therefore, if the liquidity management of a bank is not proper, it can adversely
affect the performance of the banks (Gunsel N., 2007).

i. Cash to Deposit Ratio.

Liquid Assets include cash in hand, balance with the RBI, balance with other banks (both in
India and abroad), and money at call and short notice. Of all the above mentioned liquidAssets,
Cash is the most liquid of all liquid assets. The ratio gives a picture of overall liquidity position
of the bank.

ii. Government Securities to Total Assets Ratio.

This ratio measures the proportion of risk free liquid assets invested in G-Securities as a
percentage of total assets. This ratio indicates the proportion of total assets that are held in
government securities.

iii. Total Investment to Deposit Ratio.

This measure establishes the effectiveness of the bank to convert their deposits into investments
and the agility in which it pays its depositors.

iv. Interest Expended to Interest Earned Ratio.

This ratio measures the ability of the bank to service its interest expenditure from the interest
income generated from advances.

3.5 Scope of the study:

During the period of study there were nine banking mergers and acquisitions where the acquire
was a public sector bank or a private sector bank and the present study covered all the nine
commercial banks (7-public sector acquirer banks and 2- private sector acquirer banks) that had
merged between 1993-1994 to 2004- 2005.The period was so chosen so as to ensure that the

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performance evaluation of bank during the post-merger period could be studied for a period of
ten years ending 2014-2015.

TABLE NO-3.2: LIST OF MERGERS AND ACQUISITIONS WITHIN THE SCOPE OF

THE PRESENT STUDY

Public Target Bank Acquirer Bank Merger Reasons

Sector Year
Banks
1. Bank of Karad Ltd. Bank of India 1993-1994 Restructuring of weak
banks- Forced merger
2. Kashinath Seth Bank State Bank of India 1995-1996 Restructuring of weak
banks- Forced merger
3. Bari Doab bank Ltd. Oriental Bank of 1996-1997 Restructuring of weak
Commerce banks- Forced merger
4. Sikkim Bank Ltd. Union Bank of India 1999-2000 Restructuring of weak
banks- Forced merger
5. Benaras State Bank Bank of Baroda 2002-2003 Restructuring of weak
Ltd. banks- Forced merger
6. Nedungadi Bank Ltd. Punjab National 2002-2003 Restructuring of weak
Bank banks- Forced merger
7. Global Trust Bank Ltd. Oriental Bank of 2004-2005 Restructuring of weak
Commerce banks- Forced merger

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Private Target Bank Acquirer Bank Merger
Sector Year
Banks
1. Times Bank Ltd. HDFC Bank Ltd. 1999-2000 Voluntary Merger-
Market driven

2. Bank of Madura ICICI Bank 2000-2001 Voluntary Merger-

Market driven

3.6 Research Objectives:

3.6.1 Main Objective:
1. To analyze the pre-merger versus post-merger performance of acquiring Public Sector
Banks and acquiring Private Sector Banks.
2. To analyze the post-merger performance of acquiring Public Sector Bank vis-à-vis
acquiring Private Sector Bank.
3. To find out if mergers and acquisitions can contribute for improvement in performance of
Indian Public Sector Banks and Indian Private Sector Banks.
3.6.2 Sub-Objective:
1. To understand the perspective and views of banking experts on the motives of
Indian banking mergers and acquisitions.
3.7 Research Hypothesis:
In order to achieve the research objectives, research hypothesis need to be formulated (Ohab,
2010). On the basis of the research problem, research objectives and the review of literature, the
following hypotheses have been formulated for this study:

Hypothesis-1
H0: There is no significant difference in the pre-merger versus post-merger Capital Adequacy
Ratio of acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Capital Adequacy
Ratio of the acquiring bank.

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Hypothesis-2
H0: There is no significant difference in the pre-merger versus post-merger Debt Equity Ratio of
the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Debt Equity Ratio of
the acquiring bank.

Hypothesis-3
H0: There is no significant difference in the pre-merger versus post-merger Total Advances to
Total Asset Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Total Advances to
Total Asset Ratio of the acquiring bank.

Hypothesis-4
H0: There is no significant difference in the pre-merger versus post-merger Government
Securities to Total Investment Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Government Securities
to Total Investment Ratio of the acquiring bank.

Hypothesis-5
H0: There is no significant difference in the pre-merger versus post-merger Net Non- Performing
Assets to Net Advances Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Net Non- Performing
Assets to Net Advances Ratio of the acquiring bank.

Hypothesis-6
H0: There is no significant difference in the pre-merger versus post-merger Gross Non-
Performing Assets to Net Advances Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Gross Non-
Performing Assets to Net Advances Ratio of the acquiring bank.

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Hypothesis-7
H0: There is no significant difference in the pre-merger versus post-merger Total Investment to
Total Assets Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Total Investment to
Total Assets Ratio of the acquiring bank.

Hypothesis-8
H0: There is no significant difference in the pre-merger versus post-merger Total Expenditure to
Total Income Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Total Expenditure to
Total Income Ratio of the acquiring bank.

Hypothesis-9
H0: There is no significant difference in the pre-merger versus post-merger Total Advances to
Total Deposit Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Total Advances to
Total Deposit Ratio of the acquiring bank.

Hypothesis-10
H0: There is no significant difference in the pre-merger versus post-merger Asset Turnover
Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Asset Turnover Ratio
of the acquiring bank.

Hypothesis-11
H0: There is no significant difference in the pre-merger versus post-merger Diversification Ratio
of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Diversification Ratio
of the acquiring bank.

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Hypothesis-12
H0: There is no significant difference in the pre-merger versus post-merger Profits per Employee
of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Profits per Employee
of the acquiring bank.

Hypothesis-13
H0: There is no significant difference in the pre-merger versus post-merger Business per
Employee of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Business per
Employee of the acquiring bank.

Hypothesis-14
H0: There is no significant difference in the pre-merger versus post-merger Net Profit Margin of
the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Net Profit Margin of
the acquiring bank.

Hypothesis-15
H0: There is no significant difference in the pre-merger versus post-merger Return on Equity of
the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Return on Equity of
the acquiring bank.

Hypothesis-16
H0: There is no significant difference in the pre-merger versus post-merger Net Interest Margin
of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Net Interest Margin of
the acquiring bank.

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Hypothesis-17
H0: There is no significant difference in the pre-merger versus post-merger Interest Spread of
the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Interest Spread of the
acquiring bank.

Hypothesis-18
H0: There is no significant difference in the pre-merger versus post-merger Interest Income to
Total Income Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Interest Income to
Total Income Ratio of the acquiring bank.

Hypothesis-19
H0: There is no significant difference in the pre-merger versus post-merger Cash to Deposit
Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Cash to Deposit Ratio
of the acquiring bank.

Hypothesis-20
H0: There is no significant difference in the pre-merger versus post-merger Government
Securities to Total Asset Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Government Securities
to Total Asset Ratio of the acquiring bank.

Hypothesis-21
H0: There is no significant difference in the pre-merger versus post-merger Total Investment to
Total Deposit Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Total Investment to
Total Deposit Ratio of the acquiring bank.

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Hypothesis-22
H0: There is no significant difference in the pre-merger versus post-merger Interest Expended to
Interest Earned Ratio of the acquiring bank.
H1: There is a significant difference in the pre-merger versus post-merger Interest Expended to
Interest Earned Ratio of the acquiring bank.

Hypothesis-23
H0: There is no significant difference in the post-merger Capital Adequacy Ratio of acquiring
public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Capital Adequacy Ratio of acquiring
public sector banks vis-à-vis acquiring private sector bank.

Hypothesis-24
H0: There is no significant difference in the post-merger Debt Equity Ratio of acquiring public
sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Debt Equity Ratio of acquiring public
sector banks vis-à-vis acquiring private sector bank.

Hypothesis-25
H0: There is no significant difference in the post-merger Total Advances to Total Asset Ratio of
acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Total Advance to Total Asset Ratio of
acquiring public sector banks vis-à-vis acquiring private sector bank.

Hypothesis-26
H0: There is no significant difference in the post-merger Government Securities to Total
Investment Ratio of acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Government Securities to Total
Investment Ratio of acquiring public sector banks vis-à-vis acquiring private sector bank.

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Hypothesis-27
H0: There is no significant difference in the post-merger Net Non-Performing Assets to Net
Advances Ratio of acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Net Non-Performing Assets to Net
Advances Ratio of acquiring public sector banks vis-à-vis acquiring private sector bank.

Hypothesis-28
H0: There is no significant difference in the post-merger Gross Non-Performing Assets to Net
Advances Ratio of acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Gross Non-Performing Assets to Net
Advances Ratio of acquiring public sector banks vis-à-vis acquiring private sector bank.

Hypothesis-29
H0: There is no significant difference in the post-merger Total Investment to Total Asset Ratio of
acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Total Investment to Total Asset Ratio of
acquiring public sector banks vis-à-vis acquiring private sector bank.

Hypothesis-30
H0: There is no significant difference in the post-merger Total Expenditure to Total Income Ratio
of acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Total Expenditure to Total Income Ratio
of acquiring public sector banks vis-à-vis acquiring private sector bank.
Hypothesis-31
H0: There is no significant difference in the post-merger Total Advance to Total Deposit Ratio of
acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Total Advance to Total Deposit Ratio of
acquiring public sector banks vis-à-vis acquiring private sector bank.
Hypothesis-32
H0: There is no significant difference in the post-merger Asset Turnover Ratio of acquiring public
sector banks vis-à-vis acquiring private sector bank.

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H1: There is a significant difference in the post-merger Asset Turnover Ratio of acquiring public
sector banks vis-à-vis acquiring private sector bank.

Hypothesis-33
H0: There is no significant difference in the post-merger Diversification Ratio of acquiring public
sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Diversification Ratio of acquiring public
sector banks vis-à-vis acquiring private sector bank.

Hypothesis-34
H0: There is no significant difference in the post-merger Profit per Employee of acquiring public
sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Profit per Employee of acquiring public
sector banks vis-à-vis acquiring private sector bank.

Hypothesis-35
H0: There is no significant difference in the post-merger Business per Employee of acquiring
public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Business per Employee of acquiring
public sector banks vis-à-vis acquiring private sector bank.

Hypothesis-36
H0: There is no significant difference in the post-merger Net Profit Margin of acquiring public
sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Net Profit Margin of acquiring public
sector banks vis-à-vis acquiring private sector bank.

Hypothesis-37
H0: There is no significant difference in the post-merger Return on Equity of acquiring public
sector banks vis-à-vis acquiring private sector bank.

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H1: There is a significant difference in the post-merger Return on Equity of acquiring public
sector banks vis-à-vis acquiring private sector bank.

Hypothesis-38
H0: There is no significant difference in the post-merger Net Interest Margin of acquiring public
sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Net Interest Margin of acquiring public
sector banks vis-à-vis acquiring private sector bank.

Hypothesis-39
H0: There is no significant difference in the post-merger Interest Spread of acquiring public
sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Interest Spread of acquiring public sector
banks vis-à-vis acquiring private sector bank.

Hypothesis-40
H0: There is no significant difference in the post-merger Interest Income to Total Income Ratio of
acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Interest Income to Total Income Ratio of
acquiring public sector banks vis-à-vis acquiring private sector bank.

Hypothesis-41
H0: There is no significant difference in the post-merger Cash to Deposit Ratio of acquiring
public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Cash to Deposit Ratio of acquiring public
sector banks vis-à-vis acquiring private sector bank.

Hypothesis-42
H0: There is no significant difference in the post-merger Government Securities to Total Asset
Ratio of acquiring public sector banks vis-à-vis acquiring private sector bank.

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H1: There is a significant difference in the post-merger Government Securities to Total Asset
Ratio of acquiring public sector banks vis-à-vis acquiring private sector bank.

Hypothesis-43
H0: There is no significant difference in the post-merger Total Investment to Total Deposit Ratio
of acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Total Investment to Total Deposit Ratio
of acquiring public sector banks vis-à-vis acquiring private sector bank.

Hypothesis-44
H0: There is no significant difference in the post-merger Interest Expended to Interest Earned
Ratio of acquiring public sector banks vis-à-vis acquiring private sector bank.
H1: There is a significant difference in the post-merger Interest Expended to Interest Earned Ratio
of acquiring public sector banks vis-à-vis acquiring private sector bank.

3.8 Research Methodology:

Differing requirements of information, availability of time and need patterns have led to
development of various types of research methods (Cooper and Schindler, 2006). The various
methods available today are the result of various modifications and improvements that have been
made over time. These have helped develop methods that are more appropriate and applicable to
specific areas of research. The need of any research method, however still remains the same, to
get information (Bryman and Bell, 2003). The reason behind the use of any method for research
should justify the generation of optimum results (Bryman and Bell, 2003; Cooper and Schindler,
2006). In order to select the appropriate method(s) for the study, the strengths and weaknesses of
various methods were analyzed so as to choose the best method for optimum results.
Carrying out a research task is by no means an easy or an inexpensive task. The use of the right
method leads to useful information and a wrong method leads to wastage of time, money and
resources (Sekaran and Bougie, 2010). The choice of a wrong research process can prove fatal
for a company, as it might lead to the implementation of strategic plans that may not be suitable
for the current period of time or the current market. Therefore, before conducting any research it
becomes utmost importance to outline the aims of the research, i.e. what the research aims to

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accomplish (Sekaran and Bougie, 2010). Two broad types of philosophies available for research
are the positivistic and phenomenological paradigms. (Hussey et al, 1997) differentiates both
types of paradigms by classifying positivistic as quantitative, objectivist, scientific,
experimentalist and traditionalist (Bryman and Bell, 2003, Saunders et al., 2009). Whereas,
phenomenological paradigms are associated with qualitative, subjectivist, humanistic and
interpretive approach (Cooper and Schindler, 2006; Sekaran and Bougie,2010). Positivist
paradigm is the philosophy on which the current study is based. The research methodology can
be classified broadly into inductive and deductive (Rothchild, 2006).

3.8.1 Inductive Methodology:

Inductive reasoning moves from a particular to the general. “It gathers together particular
observations in the form of premises, then it reasons from these particular premises to a general
conclusion” (Aqil Burney, Nadeem Mahmoud,2006; Decoo, 1996; Rothchild, 2006).

CHART NO- 3.2: INDUCTIVE REASONING

Research Question

Observation

Hypothesis

Analysis

Draw Conclusion

Theory

Source: (Trochin,2001)

The present research fell under well-defined theories of mergers and acquisitions, financial
performance evaluation and acquirers’ post-merger performance evaluation.

3.8.2 Deductive Methodology:

Deductive moves from general to particular. “It takes a general premise and deduces particular
conclusions” (Aqil Burney,Nadeem Mahmoud, 2006; Decoo,1996; Rothchild, 2006).Positivist

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paradigm is the philosophy on which the current study is based and the overall methodology
used is deductive. “Deductive methodology is a method for generating new theory from various
types of research” (Bryman and Bell, 2003, Rothchild,2006;Zikmund, 2000). Among others, the
positivism philosophy entails the deductive methodology, which was found the most suitable
basis to develop this research study. In the deductive approach, a theory and hypothesis (or
hypotheses) is developed and a research strategy is subsequently designed to test the hypothesis
(Saunders et al., 2003). The deductive research process by (Bryman and Bell, 2003) applied to
this study is illustrated below.

CHART NO- 3.3: DEDUCTIVE RESEARCH PROCESS

Theory

Hypothesis

Data Collection

Analysis and findings

Hypothesis confirmed
or rejected

Revision of theory
(Adapted from Bryman Bell,2003)

In adopting the above model to the research, the process began with review of mergers and
acquisitions that have taken place in the Indian banking sector during the period under study and
the underlying motives for these acquisitions highlighted from research literature. As a result of
literature, nine banking mergers, that have taken place during the period under study was
selected, based on which the study identified the suitable method for evaluation of pre-merger
versus and post-merger performance of Indian public sector banks vis-à-vis Indian private sector
bank and specified The CAMEL banking performance evaluation model as well as suitable data
collection methods. Thereafter based on the findings from the data collected and model
considered each of the performance evaluation parameters were assessed and subsequently
appraised for significant differences in the pre-merger and post-merger performance of banks

141
merged during the period under study as well as for any significant difference in the post-merger
performance of Indian public sector acquiring bank vis-à-vis Indian private sector acquiring
bank. This led to revision of theory, from which a clear understanding was achieved if mergers
and acquisition led to increase in performance of the acquirer bank as well as increase in
performance in the post-merger period of both or either of Indian public sector bank and Indian
private sector bank.

Although this study followed a deductive approach which is typically related to quantitative
research, qualitative data was still valuable and relevant as suggested by (Saunders et al., 2003).
Moreover, the research study approached the idea of triangulation (Bryman and Bell, 2003),
following which both quantitative and qualitative methods were combined and both primary and
secondary data were collected in order to increase the validity of the findings.

More distinctively, a structured in-depth interview method relating to qualitative research was
also conducted.The in-depth interviews with top level banking executives assisted to collect
actual information on the merger motives in banks as well as to analyze the impact of mergers
and acquisitions on the performance of the acquiring bank.

3.9 Sampling Method:

“Sampling is one of the major aspects of research, which is concerned with collecting, analyzing
and interpreting data. It involves the study, in considerable detail, of relatively small number of
informants taken from a larger group”, (Agarwal, 1997). The process of sampling means to
identify and select certain elements which would represent the entire population under study
(Lind et al., 2008). The chief decision that the study had to decide was to whether implement the
census study or the sample approach. Census means that each and every element that forms a
part of the research will be investigated and sample means that few elements that represent the
entire research will be investigated (Bluman,2009). In the present study the census sample is
chosen, hence the study analyses all the bank mergers and acquisitions that have taken place
during the period 1993-1994 to 2004-2005.

As the research aimed to analyze the pre-merger and post-merger performance of Indian public
sector banks vis-à-vis Indian private sector banks merged during the period 1993-1994 to 2004-

142
2005, an important determining characteristic of the census sample was the fact that the banks
chosen have experienced mergers and acquisition and above all, the banks chosen are for such
period of study that there was a blend of both public sector bank acquirers as well as private
sector bank acquirers as well as a mix of voluntary acquisitions as well as forced acquisitions.
Also whilst analyzing the post-merger performance of Indian public sector banks vis-à-vis Indian
private sector banks, the post-merger period is taken as a period of ten years, so that the study
can cover a post-merger period of ten years ending 2014-2015, since mergers and acquisitions is
a long term strategic decision, the time horizon within which the acquisition will show results
will be a longer period. Hence, keeping in perspective this view as well taking cue from the
interviews of banking executives, the post-merger performance evaluation of public sector banks
vis-à-vis private sector banks is done for a period of ten years post the merger and acquisition
ending 2014-2015.

3.9.1 Sample Size:

The size of the sample depends on the type of information required from the research study and
the cost involved (Saunders et al., 2009). This means calculating beforehand, the degree of
accuracy required in the results of the study. Careful thought should also be given to the time-
constraint (Saunders et al., 2009). Cost and accuracy are closely related with the time taken to
complete the research study, and to some extent there is bound to be conflict. Considering all
these factors, the sample size chosen for the study was mergers and acquisitions taken place
during the period 1993-1994 to 2004-2005. The study aimed at studying the performance of
banks on the CAMEL Model parameters for a period of 5 years pre-merger and five years post-
merger. Towards meeting the second objective of the study that evaluates the post-merger
performance of the bank, during the period of the study, it was decided to take the post-merger
period of 10 years so that the study can cover a post-merger period of ten years ending 2014-
2015.
During this period there were nine banking mergers and acquisitions, out of which seven were
where the acquirer was an Indian public sector bank and in two cases the acquirer was Indian
private sector bank.

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 TABLE NO- 3.3: LIST OF INDIAN BANKS MERGERS AND ACQUISTIIONS DURING
THE PERIOD OF STUDY

Public Target Bank Acquirer Bank Merger Period of 5 years Pre- Post-Merger
Sector Year merger and 5 years Post- period of 10
Banks merger years
Pre-merger Post- Post-merger
period merger period from-
period end
1. 1988-1989 to 1994-1995 1994-1995
Bank of Karad Ltd. Bank of India 1993- 1992-1993 to to
1994 1998-1999 2003-2004
2. 1990-1991 to 1996-1997 1996-1997
Kashinath Seth Bank State Bank of 1995- 1994-1995 to to
India 1996 2000-2001 2005-2006
3. 1991-1992 to 1997-1998 1997-1998
Bari Doab bank Ltd. Oriental Bank of 1996- 1995-1996 to to
Commerce 1997 2001-2002 2006-2007

Sikkim Bank Ltd. Union Bank of 1999- 1994-1995 to 2000-2001 2000-2001

4. India 2000 1998-1999 to to
2004-2005 2009-2010
5. Benaras State Bank 1997-1998 to 2003-2004 2003-2004
Ltd. Bank of Baroda 2002- 2001-2002 to to
2003 2007-2008 2012-2013

6. 1997-1998 2003-2004 2003-2004

Nedungadi Bank Ltd. Punjab National 2002- to to to
Bank 2003 2001-2002 2007-2008 2012-2013

7. 1999-2000 to 2005-2006 2005-2006

Global Trust Bank Oriental Bank of 2004- 2003-2004 to to
Ltd. Commerce 2005 2009-2010 2014-2015

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Private Target Bank Acquirer Bank Merger Period of 5 years Pre- Post-Merger
Sector Year merger and 5 years Post- period of 10
Banks merger years
Pre-merger Post- Post-merger
period merger period from-
period ending
1 1994-1995 2000-2001 2000-2001
Times Bank Ltd. HDFC Bank Ltd. 1999- to to to
2000 1998-1999 2004-2005 2009-2010
2 1995-1996 2001-2002 2001-2002
Bank of Madura ICICI Bank 2000- to to to
2001 1999-2000 2005-2006 2010-2011

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3.10 Data Collection:

Two forms of data collection and information collection system exists in the research setting
(Cooper and Schindler, 2003). Both the data collection techniques are listed below:
1. Secondary data collection.
2. Primary data collection.
Data can be collected through primary data sources or secondary data sources or through a
combination of both.

3.10.1 Secondary data collection:

Secondary data collection is an essential part of this study and was implemented to understand
and build a framework for analysis. The study has used the secondary form of data for the
present research. The collection of secondary data involved the proactive seeking of data, both
qualitative and quantitative, that already existed and which was useful in the analysis and
planning of the present study. Secondary data on Indian banking mergers and acquisitions and
their impact on performance of the bank was collected from official publications, business
magazines, software’s for generating industrial information like CMIE, ACE Analyzer, Industry
Interface, analysts’ reports of research companies, Reserve Bank of India’s official publications,
local and international newspapers, articles, World Wide Web, brochures and books. The audited
financial statements of the banks have been the most important source of secondary data
collection in the present study.

Material was generally sourced from:

1. Online bank modules
2. Reports and publications by Reserve Bank of India
3. Data contained in the banks information system.
4. Annual reports and audited financial statements and accounts of the bank.
5. Online sources.

Since the present research is essentially based on secondary sources of data, the study has
collected financial information from the respective acquiring banks. This financial information

146
over the period was studied which involved collection of financials for certain years before the
merger and after the merger.

3.10.2 Primary data collection

Primary data is that type of data which is collected for the first time and for the specific purpose
of the research (Cooper and Schinlder, 2003). In simple words the data does not prevail to be
collected unless the need is desired for it. This type of information is the first hand information
collected exclusively for the purpose of research (Saunders et al., 2009). Primary data can be
collected in four ways:

I. Observations: Observational method of collecting information can be either participative

or non-participative. In a participative observation, the researcher becomes a part of the
population and observes the areas of study. In non-participative observation, the
researcher studies the population from a distance (Saunders et al., 2009).
Three methods of observation generally used in research are audits, recording devices
and watching people’s behavior. This method does not offer help in this research study as
it is unsuitable for the aims of this research, besides it would also involve privacy
concerns of banks.

II. Experimentation: Experimentation centers around controlled experiments in which

efforts are made to hold conditions constant, thus enabling the efforts of a particular
factor or variable to be studied or measured (Saunders et al., 2009). This method was not
suitable as the impact of mergers and acquisition on the performance of Indian public
sector banks vis-à-vis Indian private sector banks was being researched into.

III. Focus groups: “In focus group the researcher tries to generate discussion about one or
several topics in a group of 6 to 12 people”, (Dibb et.al, 1994). Since focus groups are
qualitative devices, with limited sampling accuracy, focus groups cannot be considered a
replacement for quantitative analysis (Saunders et al., 2009). Besides this study involves
all the merger and acquisition deals that have taken place during the period under study,
hence this method is unsuitable to the present study.

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IV. Surveys: The descriptive research approach gives a variety of methods and the one
suitable for this study is the survey method. Surveys are research measurement
procedures that involve asking questions to respondents (Saunders et al., 2009). Surveys
can range from a short paper and pencil feedback form to an intensive one-on-one in-
depth interview. The survey is a non-experimental, descriptive research method. As the
phenomenon under study could not be directly observed, the survey method through an
intensive one-on-one in-depth structured interview with banking top level executives of
acquirer banks was considered appropriate to collect data. In this research study, both
exploratory and descriptive studies were used to get adequate information for the
achievement of the research objectives. Survey method was chosen because of the need
to get detailed information from the banking executives that are interviewed.

The research instrument intended for the study is in-depth structured interviews with top level
banking executives from acquirer banks. The primary form of data collection technique would
enable data gathering by conducting in-depth interviews with top level executives of acquiring
banks. The main aim of the interview here was to collect first-hand information as to why the
acquiring bank entered into the mergers and acquisitions deal and what are the synergies that are
derived from the merger. Towards this a detailed guideline questionnaire was prepared that
assisted in collecting primary data in a desired manner which would not lead the interview to go
in another direction.

3.11 Structured Interviews:

The study involved in-depth structured interview with top level banking executives to collect
first-hand information as to why the acquiring bank entered into the merger as well as to analyze
the impact of mergers and acquisitions on the performance of the acquiring bank. Since the
difficulties in approaching the potential interviewees were foreseen, it was decided that the
sample for interview would be as large as possible within three constraints.
1. Interviewees were of those acquirer banks that were merged or acquired during the period
under study or interviewee can also be regulator.
2. Interviewees held top level management position in the banks.
3. Different interviewees held different positions in the top level management cadre.

148
The reason for the first constraint was to ensure interviewees are of the acquirer bank that
belonged to the sample under study so that the analysis was accurate. With regards to the second
constraint the focus was to ensure that interviewees have relevant experience to understand and
contribute to the research topic. The last constraint was set in order to ensure the findings capture
the viewpoints of different levels within the banks involved in mergers and acquisitions.
Accordingly, interviewees were bank managers of the acquiring banks, banking executives at
senior managerial positions, officers at bank’s headquarters and regulators.

Once the interviewee criteria were generated, the banks that were under the study period were
listed. A request for an interview was made either by email or by telephone. A dual approach
recommended by (Bryman and Bell, 2003) was taken up for the present research study. First was
to make a telephone call to a named person who was most likely to be appropriate for the
interview, and then to follow this up with an introductory letter that clearly clarified the research
purpose, process and requirements. Finally, a telephone call was made or an email was sent to
ask their willingness to participate and make an appointment for the interview. The initial contact
was made with a group of people who were relevant to the research study and then these contacts
were used to establish contacts with others. Such actions enhanced the accessibility to potential
respondents, which increased data credibility. All participants expressed their desire to facilitate
the interview process. The study had six interviewees in total with the details provided in Table
No – 3.4.

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 TABLE NO- 3.4: DESCRIPTION OF INTERVIEWS

Name of the Position Experience Interview Interview

Organization time type
Interviewee-1 Indian Banking Chief Executive Office 45 years 50 minutes Personal
Association.
Interviewee-2 Bank Of India DGM 35 25 minutes Personal
Interviewee-3 ICICI Bank Deputy Branch Manager 7 Not Email
Applicable
Interviewee-4 SBI DGM 23 30 minutes Personal
Interviewee-5 BSE Head-Business Strategy 21 35 minutes Personal
and Corporate Marketing
Communications and Legal
Commercial.
Interviewee-6 Union Bank of DGM 37 40 minutes Personal
India

3.11.1 Design of the structured interview parameters

The interview questions were constructed following the process recommended by (Bryman and
Bell, 2003). A list of standardized questions covering specific topic was developed which could
be used as an interview guide. The interviewing topics covered a wide category of issues like
demographics of the acquiring bank, motives for the deal, impact of mergers and acquisitions on
the performance of the acquiring banks and the Indian banking sector. The questions were
organized into four parts:

Part-I- Demographic
Part-II- Motives for the deal
Part-III- Impact of mergers and acquisitions on the performance of the acquiring bank.
Part-IV- Mergers and acquisition as a tool to improve performance in Indian commercial banks.

The set of questions started with general questions and then moved to more specific ones. Most
of the questions were of open-ended nature in close connection to the research objective.

150
Nevertheless, the order of the questions varied depending on the conversation flow between
interviewers and interviewees. Moreover, along the conversation, the interviewers raised
additional questions in order to clarify the interviewees’ answers as well as to explore the issues
further. Whilst designing the interview questions careful attention was paid to the drafting,
terminology and sequencing of questions, Inspite of this the list of questions had been amended
after the mock interview which was conducted on one interviewee to pre-test the interview
questions, also, after the first interview, some minor changes were made in order to make the
questions clearer.
The structure of the interview is provided in Appendix No – 1.

3.11.2 Interview process:

Of the six interviews, five were conducted face-to-face and approximately ranged from thirty
minutes to fifty minutes. Recognizing the fact that notes-taking during the interview process
could distract the attention of the interviewer as well as distort the interviewee’s answers,
permission was sought of the interviewee, before commencing with the interview, of using a
recording device. The process of recording the interview did help in reducing errors in
memorizing and deducing answers. The interviewees were assured that the entire recorded
interview would remain confidential and would not be made available without their permission.
The recorded interviews were transcribed and summarized to form the basis for data analysis and
sent to all interviewees to check the validity of the information. In conclusion, some information
was obtained directly from the interviewees’ conversation while some others were inferred from
the interview.

3.12 Statistical Tools and Techniques:

I. In order to analyze if there is any significant difference in the pre-merger versus post-
merger performance of the acquiring banks under study for the period of study, the
Paired t test is applied to the CAMEL performance evaluation parameters of the
acquiring banks during the pre-merger and post-merger period at 95% level of
confidence.

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 The Paired t-test is the relevant test to compare a sample group’s scores before and
after an intervention, in order to measures whether means from a within-subjects test
group vary over 2 test conditions.
Therefore, to evaluate if there is any significant difference in the pre-merger versus
post-merger performance of the acquiring banks under study for the period of study
the paired t test was applied as a test of significance at α = 0.05.

The pre-merger period and post-merger period consists of a period of five years
before and five years after the merger.

II. In order to analyze if there is any significant difference in the post-merger

performance of Public Sector acquiring banks vis-à-vis Private Sector acquiring
banks on the CAMEL parameters, the Independent-samples t-test was applied at 95%
level of confidence to check for the significant difference.

The Independent samples t-test is probably the most commonly used Statistical Data
Analysis procedure for hypothesis testing. It is the relevant test to analyze whether or not
two independent populations have different mean values on some measure.

Therefore, to evaluate if there is any significant difference in the post-merger

performance of Public Sector acquiring banks vis-à-vis Private Sector acquiring banks
under study for the period of study on the CAMEL parameters he Independent Samples t-
test was applied as a test of significance at α = 0.05.

The post-merger period consists of a period of ten years after the merger or acquisition.
III. The hypotheses were tested using paired t test and t test.
IV. For smooth and accurate analysis of the data, advanced statistical analysis software
SPSS, version 16 is used.
V. The research findings are tabulated and illustrated with the help of tables, charts and
other graphical representation tools.

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3.13 References:

1. Agarwal, S. (2002), “Marketing Research”, (2nd Edition), Global Business Press.

2. Aqil Burney and Nadeem Mahmoud, (2006), “A Brief History of Mathematical Logic
and Applications of Logic in CS/IT.”, Karachi University Journal of Science, Volume 34,
Issue 1, pp. 61-75

3. Bluman, A. G. (2009), “Elementary Statistics. A step by step approach”, (7th edition),

USA: McGraw-Hill.

4. Brigham and Houston (2007), “Fundamentals of Financial Management”,(12 th edition),

South Western Cengage Learning:USA

5. Bruns, C. (2007), “An administrative page of the Paulina June & George Pollak Library
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6. Bryman, A., & Bell, E. (2003), “Business Research Methods”,UK: Oxford University
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7. Busha, C. A. & Harter, S. P. (1980), “Research methods in librarianship: Techniques and

interpretations”, New York: Academic Press.

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