Evaluating the Potential Efficiency from Virtual Mergers and Acquisitions of Chinese Banks

Abstract

Can mergers and acquisitions (M&A) of commercial banks improve their efficiency? This paper gives the definition of potential efficiency and designs an "eight step" method to evaluate it. Taking 21 listed commercial banks in China as the research object, this paper selects the data from 2011 to 2019, and uses Three-stage DEA method and Bootstrap DEA method to evaluate the technical efficiency of individual commercial banks and the potential efficiency of virtual M&A of commercial banks from the perspective of prediction. The result shows that most of the virtual M&A is beneficial, but the M&A of technical efficient banks can not guarantee the banks after M&A are technical efficient, nor can it guarantee the M&A behaviors are potential efficient.