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Ang Yen Chui CGA020043

Cynthia
Chong Chew Yee CGA020038

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Submitted to the Graduate School of Business Faculty of Business and Accountancy University
 Malaya, in partial fulfillment

of the requirements
 for the Degree
of

Masters
of Business Administration

 

 

April
2005

 

 

 

 

We would 
especially  like to thank  Professor Dr.  G.  Sivalingam  for his invaluable guidance  and  contribution   to  this  research  paper.  We  thank  you,
 Prof,  for  your patience and positive critiques, which is not limited to this research, but to our
lives in general.

 

 

We would like to thank Encik Ghazali
Mohamed Fadzil and his team at the Knowledgement Management  Center, Bank Negara Malaysia,
Kuala Lumpur for their kind assistance.

 

 

A special  thank
you goes to Jason Liew for his priceless  contribution,  selfless effort and continuous encouragement  in making this research
paper possible.

 

 

A sincere
heartfelt to all individuals and companies
who have directly 
and indirectly contributed to this research paper.

ABSTRACT

 

 

 

In view of the liberalisation and globalisation of the banking sector,  the consolidation of
domestic banking  institutions  in  2000
is  inevitable.  A fragmented
 banking system will  only 
 increase   the 
 vulnerability    of  the   financial   system 
 and 
 indeed   the vulnerability of the economy  as a whole, according  to Tan  Sri Dato’  Seri Ali Abul Hassan Bin Sulaiman, Governor of Bank Negara Malaysia
on August 1999. There is a
need for a strong and efficient banking  system that is resilient in order to support the financing needs of the economy
 so that the nation
can continue  to achieve  a strong and sustainable economy.

 

 

This paper investigates the effectiveness between
 pre and post  merger  effect of the domestic
mergers in Malaysia
banking institutions, which arguably is the precondition for sustainable  industry growth,  according  to  Tan  Sri  Dato’  Dr.  Zeti  Akhtar  Aziz, Governor
of Bank Negara
Malaysia on 20 August 2002.

 

 

This paper is organised
as follows. Chapter 1   presents the introduction of the domestic bank mergers
 and the rationale
 behind
 these  nationwide  consolidation  exercises.  It
reviews  the  theoretical
 framework
 of domestic  bank  merger
 exercise
 and  merger theories.  Chapter  2 reviews
 related
 literature.  Chapter
 3  discusses  the  recent  bank mergers
 in  Malaysia.   Chapter   4  discusses   the  variables   used 
 in  our  research methodology  to discuss
 the effect of domestic  bank mergers  on the performance of Malaysian banks.  Chapter 5 argues the results and assesses the magnitude
 of the effect of the variables on the merger exercise.  Chapter 6 concludes the paper.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

II

 

 

 

PAGE

 

Acknowledgement.
 
Abstract.

.i
 
ii

Table of Contents

iii

 
Chapter One:
 Introduction

 

1.1  Problem Statement.

1

1.2 The Banking Industry in Malaysia

1

1.3 The Rationale for Domestic Bank
Mergers

4

1.4 Merger Theories

6

 
1.4.1  Differential Efficiency

 
7

1.4.2 Managerial  Synergy

8

1.4.3  Financial Synergy

9

1.4.4 Operating Synergy

10

1.4.5 Pure
Diversification

11

1.5 Conclusion

12

Chapter Two: Literature Review
 
2.1 Introduction

 
 
13

2.2 Performance

13

2.3 Conclusion

17

Chapter Three: Recent Bank  Mergers in Malaysia
 
3. I  Introduction

 
 
19

3.2  Domestic Bank Mergers

20

3.3 Conclusion

28

Chapter Four: Research Methodology
 
4.1  Introduction

 
 
28

4.2 Methodology

29

4.3 Operating Performance

30

 

 

 

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