Effects and Risks of Mergers and Acquisitions on Entrepreneurship in Banking and Finance: Empirical Study from Slovakia

This study examines effects of mergers and acquisitions on entrepreneurship in the banking industry and identifies substantial factors of changing in its financial performance and risks from aspect of bank profitability in the economy of Slovakia, using regression modelling. The relationships between the dependence of the profitability of banking sector and selected financial indicators from aspect of its performance have been surveyed spanning a period of nine years (2004-2012). The research problem is as following: Do mergers and acquisitions create a value added and are desirable or more risky from financial aspect in the market economy. The task of this study is to use the financial analysis and project a multiple regression model (using data 1997-2011) to determine the success level of bank merger/acquisition between CSOB Bank and ISTROBANK in 2009, operating on the Slovak banking market. In the research hypotheses we investigate if the real profit development strengthened due to the impact of the bank merger/acquisition and impact of risks due to the global crisis on the financial performance. The novel designed linear regression model with seven independent variables, based on the methodology of empirical studies, compares the estimated and real profit development before and after bank merger/acquisition (2009-2011) as well. Our findings indicate that comparable models based on the existence of common relationships and dependences can be applied in other countries of the EU and present implications for decisions-making in the field of the increase global financial performance, trends and growth strategies of commercial banks.