Bank size, intermediary roles and macroeconomic determinants on bank performance and stability: evidence from merger and acquisition in six Asian economies

Purpose Mergers and acquisitions (M&A) represent a key strategic mechanism for business expansion and growth. This study aims to examine and compare the performance and stability of banks across the pre- and post-M&A periods, with a particular focus on differences among small, medium and large bank categories. Design/methodology/approach This study uses panel techniques to analyze unbalanced panel data for 24 banks. from 2004Q1 to 2020Q4 from six economies, namely, Saudi Arabia, Qatar, Bahrain, Kuwait, UAE and Pakistan. Findings The results indicate that merger and acquisition significantly impact the performance and stability of banks in pre and post M&A. Suggesting that consolidation strategies bring meaningful structural and operational changes to the banking sector. Moreover, bank size exhibits dual effects on the bank performance and stability. Small banks are better performing while large and medium-sized banks are more stable in post-merger and acquisition. Research limitations/implications Future research may be conducted adding more samples (many banks and many countries). Moreover, it can include cross-border merger and acquisition for different jurisdiction. Practical implications This study highlights several key policy implications for stakeholders. First, cross-border mergers and acquisitions (M&A) are encouraged across jurisdictions, as they have been shown to enhance both performance and stability within the banking sector. Second, as small banks are more performing in the post M&A, it suggests small sized bank is more potential and encouraged involving in M&A strategy, expand into new markets and diversify their products, improving their revenue streams; however, large and medium sized banks show more stable than small banks, it further suggests M&A for the banking industry. Third, while regulatory challenges may arise when merging different types of banks, this study acknowledges this as a limitation and suggests it as an area for future research. Originality/value The inclusion of bank stability in the context of merger and acquisition of different bank size categories along with performance is a value addition to the paper.