Regulator-driven bank mergers in a bank-based economy: how do acquirers fare?

This study examines the post-merger financial performance of Indian banks in the unique context of a series of regulator-driven mergers since 2008. The financial performance of banks is measured using CAMELS-based composite scores derived through principal component analysis. Findings indicate a clear contrast between private and public sector bank mergers. Private sector acquirers experience improved financial health, while public sector acquirers face deterioration in the three years following the merger. These results remain robust to alternative specifications and after accounting for regulatory and macroeconomic shocks. The findings underscore the pivotal role of ownership and strategic alignment in shaping post-merger outcomes in regulator-driven mergers, offering timely insights for ongoing policy discussions on banking consolidation in India.