Impact Of Merger And Acquisition On Debt Management Ratio: A Case Study In Malaysian Banking Sectors

Abstract

This study based on efficiency theory of shareholder’s wealth maximization of acquisition principle attempted to investigate the debt management ratio of ten Malaysian anchor banks after undergoing mega merger and acquisition program which was completed in the year of 2000. As efficiency theory consists of three elements that are financial synergy, operation synergy and managerial synergy, the study will primarily focus its analysis on financial synergy (debt management). Using accounting technique (financial statement analysis) to draw the implication, the study results highlighted the performance of those anchor banks from the year 2000 to 2004. The ratio analysis tools employed covered total liabilities to total assets, total liabilities to total equity, times interest earned, and cash debt coverage ratio. The findings shows that in general, the anchor banks recorded improvement in term of debt management; yet more comprehensive strategies have to be executed to further enhance the financial synergy. The generalization however shall be done in more cautious as the study inherits several limitations including the application of financial statement which based on historic cost rather than reflecting the current market situation. The study perhaps can be extended to include the analysis of earnings performance ratios and market/investor perception toward the resilience of those anchor banks after completing the merger and acquisition mega program.