Living Together Before Marriage Essay -- essays research papers

Living Together Before Marriage As the rate of divorce soars and as increasing numbers of marriages disintegrate, living together has become the popular alternative to many people in north America. Expersts estimate that "roughly 2.2 million people are currently sharing bed and board in a live-in arrangement, this is approximately 1% of the total population."("Family." Comptoms Encyclopedia. 1992 ed.) Living together, more formally known as non marital cohabitation, is an emerging lifestyle. In fact, "More than one fourth of all unmarried couples living together in the early 1980's were between 25 and 34 years old, and an additional 19 percent were 45 and over."("Today's Families."Detroit Free Press 18 October 1995: B17.) Although living together is not a recent invention, the relationship has yet to be legitimized with a respectable name. Existing terms such as "shacking up" or "living in sin" are just some of the crude names being tagged to people living together. Living together can be valuable a substitute for marriage, a cur e-all for marital problems, and a solution to the problem of frequent divorce.   Ã‚  Ã‚  Ã‚  Ã‚  A popular rationale for living together is that it is an ideal way to have a "try out." This trial marriage is a result of the ever increasing divorce rate. Many couples are afraid of marriage and decide to live together with the intention to persue marriage if the temporary arrangement is successful. The couples hope to "minimize their chances of a potential disastrous marriage; any conflicting attitudes toward social activities, economic arrangements, or domestic chores will be discovered and hopefully resolved while the couple live together." (Carter, Sharon. "Trial Marriage". Ladies' Home Journal 14 (May 1993): 12-13.) If an unsolveable conflict arises, the couple can cancel their wedding plans and escape the painful exercise of divorce. Living together ultimately can test the couple's compatibility and have them really get to know each other. Although evidence suggests that "couples who live together do not necessarily have more or less successful marriages than couples who don't live together before the wedding, studies show that non-marital cohabitors are more realistic about their demands and expectations of marriage.("Ross, Eshleman J. The Family: An Introduction. 5th ed. Detroit: Allyn,1988) Living toge... ...of divided energies among dating, career development, and economical survival. The burden of living can bee shared as the couple persue personal goal and ambitions. Living together, for example, can provide a harried student with emotional, physical, and sometimes economic support from a sympathetic partner. (Pearce, Jack M. Modern Day Marriages. New York: Abel- Hils,1990.)   Ã‚  Ã‚  Ã‚  Ã‚  Finally, more and more are turning to the idea of living together as the emotional, physical, social, economic, and legal benefits are much better alternative than the consequences that can arise from a failed marriage. Certainly, "not all couples choose to include living together as a temporary stage in their courtship, yet the option to cohabit is becoming increasingly popular."(Groode, Williams J. "Marriage" Comptoms Interactive Encyclopedia. (1996 ed.) The freedom associated with living together is an important aspect, because after a period of time the couple may decide to marry, to end the relationship, or simple continue living together. As future trends continue, and more marriages fail, the number of couples who live together are going to increase due to the valuable benefits.

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Effects Of Mergers And Acquisitions In Banking Sectors - Free Essay Example

Sample details Pages: 21 Words: 6425 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? This research study determines the impact of mergers and acquisition in banking sector on its profitability and measures the performance differences of Local and Foreign mergers and acquisitions banks in terms of profitability in Pakistan. The research has been conducted between five mergers and acquisitions of local and foreign commercials banks in Pakistan. The comparative analysis of commercials banks in Pakistan conducted through the financial analysis. Don’t waste time! Our writers will create an original "Effects Of Mergers And Acquisitions In Banking Sectors" essay for you Create order The past and present performance of banks has been analyzed through analysis of financial statements of all five banks on the basis of secondary data. But after conducting mean and Independence sample t-test, it is concluded that there is no significant change between ROE and ROA for before merger and acquisition and after merger and acquisition, so it leads to that banks that enrolled in merger and acquisition did not get any significant change in their profitability. Mergers and acquisitions (MA) and corporate restructuring are an immense part of the corporate finance world. Every day bankers arrange MA transactions,  which bring individual companies together  to form  bigger ones. When theyre not creating large companies from smaller ones, corporate finance compacts do the reverse and split up companies through spin-offs, carve-outs  or tracking stocks. Corporate takeovers (acquisitions) represent the strategic business techniques, used by firms t o achieve different motives. For instance, such takeovers can be used to penetrate into new markets and new geographic regions, gain expertise and knowledge, or possibly to allocate capital. Business organizations use such strategies in order to attain their competitive advantage and to survive in the market. Competition between organizations originates due to change in market environment, which can lead to the restructuring of an organization. Companies engage themselves in such kind of strategies, as it helps them to expand their businesses. This then leads them towards takeover (mergers and acquisitions), which is the result of changing market circumstances. The combination of the businesses becomes a significant part of the framework of doing the business in global market economy. These collaborations of business are penetrated in the worldà ¢Ã¢â€š ¬Ã¢â€ž ¢s business community. Nowadays these takeovers and combinations are not problematic due to the globalisation. Technol ogy and the economic changes in the international economy shift the markets trends, and this confines corporations and forces them to collaborate (merge) although they are resistance to change. Companies, which are a mix of different institutions, become part of the current market in order so that they can survive and yet remain competitive according to current standards of market forces. If they fail to meet the current conditions or trends they will not remain in the market, so to pursue new challenges, their business has to alter. The trends towards the takeovers (Mergers and acquisitions) are becoming significant and this influencing the companies strongly. It involves a great deal of accountability. In certain cases, such takeovers are so great that they force a transformation of companies and then the creation of new company is essential. Such strategies need proper planning. In order to achieve the best results, companies have to concentrate on all parts of the businesses. This is because it involves huge transactions and complex processes and if this is not properly executed, can lead to big problems. The takeover wave of the 1980 stimulated many experimental and the theoretical studies, most of which are concerned with the issues like sources of profitability after affects on management. In this paper we study the comparison of the two methods of takeover from the firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s point of view. For this we have to focus on one of the most important differences between friendly and hostile takeovers. In a hostile takeover, a firm or raider makes a tender offer directly to the shareholders of the target company, without consulting the incumbent management. Each shareholder individually decides whether or not to tender his share. In contrast, friendly takeover has to be approved by the shareholder and management. 1.1 Types of Takeovers Takeovers are often used as a common way to expand businesses, mostly on the basis of one company purchasing another company. There are two main types of takeovers Friendly Takeover (Acquisitions) Hostile Takeover (Mergers) 1.2 Friendly Takeover (Acquisition): Takeover, which is supported by the management of the target company. Friendly takeover is also known as Acquisitions, is the buying of one company by another company. The takeover target is unwilling to be bought or the targetà ¢Ã¢â€š ¬Ã¢â€ž ¢s board has no opposition against the takeover or no prior knowledge of the offer. Acquisition usually refers to a purchase of smaller firm by larger one or may be sometimes smaller firm will acquire the management control of a larger established company and keep its name for the combined entity. 1.3 Types of Acquisition: The buyer buys the assets of the target. 2This type of transaction leaves the target company as an empty shell, if the buyer buys out the entire assets. The cash target receives from the sell off is paid back to shareholders by paying dividend or through liquidation. A buyer executes asset purchase, often to cherry-pick the assets that it wants and leave out the assets and liabilities that it does not. The buyer buys the shares (and in effect the assets or whole company out right), and therefore control, of the target company being purchased. In effect, this creates something that has higher growth rate in the given market. 1.4 Hostile Takeover (Merger): A takeover which is against the wishes of the target companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s management and board of directors is the opposite of friendly takeover. A hostile takeover is also known as a merger, when you integrate your business with another and the control of the combined businesses is shared with the other owner.1 A takeover is also considered to be hostile if the board rejects the offer, but the bidder continues to pursue it, or if the bidder makes the offer without informing the board beforehand. 1.5 Classifications of mergers à ¢Ã¢â€š ¬Ã‚ ¢ Horizontal mergers take place where the two merging companies produce similar product in the same industry. à ¢Ã¢â€š ¬Ã‚ ¢ Vertical merger occur when two organizations, each working at different phases in the production of the same good, combine. à ¢Ã¢â€š ¬Ã‚ ¢ Conglomerate merger take place when the two organizations operate in different industries. Mergers and acquisitions (MA) are now rising as a major source for contemporary business expansion. This provides a significant way for growing rapidly and entry into the market. According to estimates, over 30,000 MA transactions have been taken place annually in the new Millennium, which would be equal to the one contract every 17 minutes. The historic background of global takeover is highly active, averaging more than $1 trillion per year in transaction value. During 2000, organizations spent $3,500 billion US dollars in all MA cases, a huge increase has been seen because in 1991 its $500bn, which became $ 1,500bn in 1997. These figures show the globally increasing trends towards mergers and acquisitions. Takeover (MA) processes involve a great deal of complexities, and legal requirements. It is not purely taken place between the organizations but involve the other issues like country regulations (if the takeover is between companies from different countries). For example, in western countries, governmental regulations apply according to which certain technologies cannot be transferred 1.6 Historical Background: Mergers and acquisitions require similar set of activities. Here we discuss the brief history of takeovers through discussion of the mergers waves. After establishing what the historical experience with mergers has been in the economy, it also includes the increased incidence of hostile takeovers, and the installation of various anti-takeover defenses by corporations and their resulting shareholder wealth effects. Other notable trends, such as the use of leverage to finance takeovers are also discussed. This field of mergers and acquisitions has shown a remarkable growth. This activity of mergers and acquisitions starts in 18th century. The growth of this market is fuelled by the debt financing through investment banks. According to the previous studies conducted by different researchers, we can divide the takeover history into five distinct periods in which these processes were in high concentration and often called the à ¢Ã¢â€š ¬Ã…“merger wavesà ¢Ã¢â€š ¬?. Many interesting features characterized these waves 1.7 Statement of the Problem: Determine the impact of mergers and acquisition in banking sector on its profitability 1.8 Research Question Research Question: what are the performance differences of Local and Foreign mergers and acquisitions banks in terms of profitability in Pakistan? Literature Review Frederikslust (1997) composed a difference between value making and redistribution theories. He argued that Synergy cause plays a key role in the value making theories, while agency problems or Hubris plays a role in the redistribution theory. Merger and acquisitions create economic sense if the entire is value more than the sum of its parts, or affirmed otherwise, if synergy exists. The excess value of horizontal mergers can be managed by: economies of scale in production and supply, access to new markets, having a mutual maiden office, elimination of unproductive management, greater financial potentials and shared immaterial assets (patents, trademarks and licenses). Vertical mergers cut down the industrial chain and reserves can be made in procurement, more professional communication is achievable, as well as production can be further focused to market expansions. A definition of synergy formulated by (Sirower, 1997) is as follows: Synergy is the enhanced competitive capacity and consequent greater cash flows in excess of what the individual companies would have attained. Sirower states that value creating mergers are rarely. A merger is meaningful when the synergies (surplus value) go beyond the incurred merger costs as well as the takeover payment. Other researchers (Healy, 1992) are additional positive and bring to a close that in the post-merger stage there are important enhancements in the cash flows evaluate to other firms in the industry. Ruud. A. I. van Frederikslust (1997) said that mergers compose no sense if the extra cash flow is lower than the takeover premium and/or is lower than the expenditures incurred by integration. There are two most important theories that give explanation the beginning of merger movement, the hubris- and the agency theory. The hubris theory states that organization strives for synergy having the aim to maximize profits for shareholders. Unluckily, managers experience conceit resulting in fewer values attai ned in the form of synergy. From research (Roll, 1986), it appears that synergetic remuneration are attained in these mergers, on the other hand the pre-calculation of synergy is commonly too high to give good reason for the takeover premium. Mueller (1989) explained the agency theory and told that the importance of the shareholders or proprietor is not similar to the interests of organization. The taking apart of capital and power induces managers to struggle for their own interests. A motive for a merger can be Empire Building, where managers struggle to enlarge the size of the corporation. Morck (1990) argued that a big company gives more position and executive salary is positively associated to the size of the company. Also, a large company offers added potential for emoluments and executive failures of the history are easier to cover up. Part of the agency theory is the theory of free cash flow. Free cash flow is to facilitate part of equity for which there are no gainful investments in the business. These cash flows, which are usually found in the (free) reserves, could be spread to the shareholders as dividends. On the other hand, according to the agency theory, these free profits are used to finance merger action that serves to gather the interests of the organization. The conclusion of a merger hardly ever leads to an enhancement in the cash flow of the involved companies. Schenk (1996) said that the game theory, component of the agency theory, is useful to explain merger waves. The moment a rival make a decision to merge, one has to choose whether to respond to the attack on the recent market position by a related move. The dilemma for management is that it does not recognize what was the driving force of the rivalà ¢Ã¢â€š ¬Ã¢â€ž ¢s move to merge and whether this action was financially rational. When one make a decision not to merge and the rivalà ¢Ã¢â€š ¬Ã¢â€ž ¢s move to merge was value making, and then one runs the threat to become a tar get of a next takeover. Keynes (1936) said that according to the game theory a corporation will make the action that minimizes be disappointed. In other words, one will formulate the action to merge, even though the possible return after the merger might be lower than can be attained separately. In the case that the profits of the merger are unsatisfactory, then there is all the time the excuse that their performance is no unusual from the rest of the industry. In this way managements status is not spoiled. This is what Keynes mentions in 1936: à ¢Ã¢â€š ¬Ã…“It is better for reputation to fail conventionally than succeed unconventionally.à ¢Ã¢â€š ¬? De Jong (1998) did not chase this micro-economic justification of merger waves. A merger is not only accomplished for the need to decrease insecurity. Leadership in association and improvement is captured irrespective of the associated insecurity. The reason that not all firms take part in a merger wave is not dependable with th e game theory. Similarly, some industries do not explain any tendency of focus regardless of their oligopolistic environment. De Jong argued that merger influence by means of the market theory. A company passes four distinct phases; namely the pioneer phase, the expansion phase, the mature phase and the declining phase. The moment a company or the industry reached the mature phase, congestion and tough price competition in combination with lower return boundaries arises. In these phases, companies will employ in horizontal mergers to decrease cost. With continue stagnation, one will also attempt to enter new markets through foreign acquisitions. In the decline phase, firms divest and sell off firms assets to gather capital for other potential markets or cut losses. Therefore, a merger sign is seen as a natural process. Van Frederikslust (1997) argued that the market response is examined at the moment the merger is declared. At that time, the study attempt to link the theories tha t clarify merger activity to the condition in The Netherlands. A raise in the share price propose positive hope of the market to the merger. In prior research, the declaration of mergers normally leads to depressing share value reactions. A merger declaration leads to declining share prices, especially for bidding companies. In a research of De Bruin and Van Frederikslust (1997) there is an average decline of 1.2 percent in the share value of the bidders as a result to the merger declaration. (Bosveld, 1997) researched 122 Dutch mergers where a minor turn down in the share value of the bidder was perceived. The markets appear to value mergers differently from the organization of the bidding firm. Steven J. Pilloff (1996) said that merger and acquisition movement outcomes in overall advantages to shareholders when the combined post-merger companies are more important than the simple amount of the two separate pre-merger companies. The key reason of this increase in value is imagin ary to be the performance improvement following the merger. The research for post-merger performance increase has focused on enhancement in any individual of the following areas, namely efficiency enhancement, improved market power, or heightened diversification. Crockett (1995) said that the numerous types of effectiveness gains may stream from merger and acquisition movement. Of these enlarged cost effectiveness is most commonly declared. A lot of mergers have been forced by a certainty that an important quantity of redundant working costs could be removed through the consolidation of actions. For example, Wells Fargo estimated annual cost savings of $1 billion from its 1996 acquisition of First Interstate. Consolidation facilitates costs to be lesser if scale or scope economies can be attained. Larger organizations may be more well-organized if redundant facilities and personnel are removed within the post-merger association. Moreover, costs may be lesser if one bank can of fer numerous products at a lower price than divide banks each providing individual products. Cost effectiveness may also be enhanced through merger movement if the management of the acquiring association is more skillful at holding down operating expense for any level of action than that of the target. Bank merger and acquisition action may also promote enhanced revenue efficiency in a manner comparable to cost efficiency. Some current deals, such as the projected acquisition of Boatmenà ¢Ã¢â€š ¬Ã¢â€ž ¢s Bancshares by NationsBank, have been motivated by potential profits in this area. Cline (1996) observed that scale economies may facilitate larger banks to propose more products and services, and scope economies may permit providers of many products and services to raise the market share of targeted customer action. Moreover, acquiring organization may increase profits by implementing higher pricing strategies, presenting more gainful product mixes, or incorporating sophisticate d sales and marketing agenda. Banks may also produce superior revenue by cross-selling different products of each merger associate to customers of the other partner. The end result is supposed to be superior revenue exclusive of the commensurate costs, i.e., enhanced profit efficiency. The final term in common refers to the skill of profits to improve from any of the sources noted above, cost economies, scope economies or marketing efficiency. In a sense, it symbolizes the total effectiveness of profits from the merger not including specific reference to the individually titled effectiveness enhancement areas. Anthony M. Santomero concluded that mergers may improve value by increasing the level of bank diversification. Consolidation may enhance diversification by either lengthening the geographic reach of an association or raising the size of the products and services presented. Furthermore, the easy addition of recently acquired assets and deposits make possible diversification by raising the number of bank customers. See (Santomero, 1995) for Greater diversification offers value by steady returns. Lower volatility may lift shareholder capital in several ways. First, the estimated value of bankruptcy costs may be condensed. Second, if companies face a convex tax schedule, then predictable taxes remunerated may drop, rising predictable net income. Saunders (1994) explained third gaining from lines of business where customer worth bank strength may be improved. In conclusion, stages of certain risky, yet gainful, actions such as lending may be improved without further capital being needed. Berger (1993) explained the past experimental work and investigative the profits of mergers focuses on modify in cost effectiveness using existing accounting data. Berger and Humphrey (1992), for example, inspect mergers taking place in the 1980s that occupied banking institutes with at smallest amount of $1 billion in assets. The outcome of their article are base d on data combined to the holding corporation level, using frontier method and the relative industry rankings of banks taking part in mergers. Frontier methodology engages econometrically guess an efficient cost frontier for a cross-section of banks. For a given organization, the difference between its real costs and the lowest cost point on the frontier matching to an institution alike to the bank in matter measures X-efficiency. The researchers find that, on standard, mergers led to no important gains in X-efficiency. Berger and Humphrey also bring to a close that the sum of market overlap and the difference between acquirer and goal X-efficiency did not influence post-merger effectiveness profits. In adding to testing X-efficiency, they also examine return on assets and entire costs to assets and attain a related conclusion: no average profits and no relative between profits and the performance of acquirers and goals. Non-interest costs yield major results, but the result are reverse of hopes that the operations of an ineffective target purchased by a well-organized acquirer should be enhanced. Akhavein, Berger, and Humphrey (1997) examine changes in profitability practiced in the same set of large mergers as examine by Berger and Humphrey. They find out that banking industry extensively improved their revenue efficiency ranking after mergers. On the other hand, rankings stand on more traditional ROA and ROE determines that exclude loan loss provisions and taxes from net profit did not change extensively following consolidation. DeYoung (1993) also uses frontier methodology to study cost efficiency and find out same conclusions as Berger and Humphrey. Cost advantages from mergers did not be present for 348 bank-level mergers taking place in 1986 1987. In addition to the short of average effectiveness gains, improvements were not related to the difference between acquirer and target effectiveness. On the other hand, DeYoung find that when both the acq uirer and target were bad performers, mergers results in enhanced cost efficiency. In adding to frontier methodology, the literatures contain numerous papers that exclusively use standard corporate finance procedures to examine the effect of mergers on performance. For example, Srinivasan and Wall (1992) inspect all commercial banks and banks holding companies mergers happening between 1982 and 1986. They discover that mergers did not shrink non-interest expenses. Srinivasan (1992) reaches a similar conclusion. Some of the studies of the European industry on this matter are the fresh work (Cybo-Ottone, 1996). In this they examine 26 mergers of European financial services institutes (not just banks) taking place between 1988 and 1995 in 13 European banking industry. Their outcomes are qualitatively alike too much of the study conduct on American banking institutes. Average abnormal outcomes of targets were extensively negative and those of acquirers were basically zero. This pa ttern recommends that there was a shift of wealth from acquirers to targets. Also equivalent to mergers of American banks, the alter in general value of European financial institutes at the time of the declaration was small and not important. This pattern sustained for at least a year. In the year following the merger, the mutual value of the acquirer and objective did not change extensively. The study of Zhang (1995) on U.S. data disagrees with those of mainly abnormal return studies. Amongst a sample of 107 merger taking place between 1980 and 1990, the researcher examines that mergers lead to a major raise in over all value. While both merger partners practiced a raise in share price about the merger announcement, objective shareholders benefited much further on a percentage basis than the acquiring shareholders. Cross-sectional outcomes propose that enhance in value were minimum when enhanced efficiency and improved market power were predictable to have their utmost potential impact. Changes in value declined as outcomes got bigger relative to acquirers and as the sum of geographic overlap bet went acquirers and goals improved. The latter finding is regular with diversification creating worth. Recently, numerous studies include both approaches in the literature. The first of these researches is performed by Cornett and Tehranian (1992) and they observe 30 large holding companies mergers happening between 1982 and 1987. The researcher fined that profitability, as calculated by cash flow outcomes on the market worth of assets, enhanced extensively after the merger. This analyzing, however, should be viewed closely for some reasons. First, the market worth of assets may be an unsuitable compute for standardizing outcome. It is defined mainly from the liability area of the balance sheet as the market worth of common stock add the book worth of long-term debt and preferred stock less cash. Given the nature of banks as financial mediators, it is vague why deposits are not incorporated in this liability-based explanation. The suitability of subtracting cash holdings is also arguable. Cornett and Tehranian discover that net income to assets, a more usual compute of bank profitability, does not change by an important amount. Cornett and Tehranian also study value-weighted abnormal outcomes around the moment of the merger declaration. They discover that the market respond to announced deals by increasing the combined worth of the merger partners. The researchers also examined that changes in other performance measures, including cash flow outcomes on the market worth of assets, were optimistically interrelated with value-weighted abnormal outcomes. These associations recommend that the market may have been able to perfectly forecast the ultimate benefits of individual mergers. Net outcome to total assets is not one of the variables that were interrelated to value-weighted abnormal outcomes, however. Jen and Winter (1974) did experi ential investigations and showed that shareholders get benefits from mergers regardless of the fact that academicians conventionally have argued they do not. Unfortunately, these studies have been focused on conglomerate mergers rather than on more usual forms. Moreover, very few attentions have been given to classification of the point of the merger method where these benefits take place. The primary problems encountered in determining merger benefits are establishment of a standard for their dimension and alteration of measured benefits for modifying in the firms risk. To create a standard, the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s merger decision is analyzed as one of external rather than internal development. Thus, the return obtained as a outcome of the acquisition must be evaluated to the return the shareholders would have received had there been no merger. The dissimilarity is the merger benefit. Since the imaginary or non- merger return cannot be monitored, it is essential to find a realistic proxy. Financial theory states that shareholders must be rewarded if the merger creates the equity of the acquiring company more risky. Therefore, the dissimilarity between the genuine return at the new risk level and the imaginary non merger return includes two elements merger advantages and compensation for changed risk. To determine only the merger gains risk compensation must be removed. For merger advantages to be measurable, the acquired company must be large sufficient to have an important impact on the functions of the acquiring firm. Important gains are exposed for a sample of companies who were not energetic acquirers, who commonly paid for the acquired companies with common stock, acquired companies in the same or closely related industries, and rewarded an average premium, based on share prices at the commencement of the first period. Benefits calculated as the difference between genuine common stock returns and forecasted returns presumably is changes in investor expectations about the company and as a result could be regarded as projected or predictable benefits. While there is no direct proof on whether or not such hope was realized, there do not appear to be any important descending revaluations for optimistic benefits during the three years observation. The constructive merger benefit originate here is opposing to some previous studies and usually exceeds the positive benefits found in others. This is partially explained by dissimilarities in the way merger advantages were calculated. First, the assessment equation approach permits separate predictions for acquiring companies based on their premerger performance. It is more approachable to individual dissimilarity and does not need all firms to do better than a single standard to be judged successful as in. Second, by decomposing the study period into 3 subperiods, it is likely to (1) reduce the risk alter problem present in several studies and exclusively recognized and (2) reduce the averaging result that exists in mainly of the studies. When the important merger benefit in period 1 is collective with the two other periods the result is small and no longer significant; thus, the longer the time over which the advantages are measured, the greater will be the impending bias from averaging. The results have many implications for financial managers. First, the benefits were created even though comparatively large premiums were rewarded to the shareholders of the acquired company. Proving that a high premium does not automatically entails an unproductive merger. Also, over 85% of the mergers occupied the exchange of common stock and/or cash so that it was needless to use hybrid securities to create the benefits. Under these situations, the only enduring source of merger advantages is working economies of some form. Thus, a well conceived and accomplish merger is possible and will defer substantial benefits for the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s shareholders . Lastly, although mergers are analyzed after the fact, it is feasible to examine them before the fact as well and exercise the results to reproduce results from potential mergers. Rhoades (1994) examines merger performance researches in banking published between 1980 and 1993. Nineteen of these researches present tests of alter in the performance of banks use accounting procedures of costs and revenue and twenty-one of these researches examine the marketsà ¢Ã¢â€š ¬Ã¢â€ž ¢ response to news of acquisitions. The outcomes are mixed, but Rhoades bring to a close that these researches, taken as a whole, do not support the view that bank mergers outcome in enhanced performance. However, since only two of these researches cover mergers after 1989, concern must be practiced in making inferences about the reaction of mergers in the 1990s. In a more current research, Pilloff (1996) examined for performance alters and for irregular outcomes related with 48 publicly-traded-bank mergers b etween 1982 and 1991. On average, amend in accounting practice variables are not dissimilar from industry patterns and abnormal outcomes around merger announcements are generally unimportant. However, cross sectional investigation identifies statistically important relationships between it and expense variables. In another research, Siems (1996) found that for 19 mega mergers declared in 1995, acquirers on average practiced negative abnormal outcomes and target banks practiced positive abnormal outcomes. Even though the market rewarded a subset of deals with the utmost percentage of office overlap, based on the marketà ¢Ã¢â€š ¬Ã¢â€ž ¢s reactions for the full sample he bring to a close that the proof is consistent with self-serving actions by managers or hubris. While many researches have been conducted on corporate governance of non financial corporations, the exceptional regulatory environment of financial corporations prevent generalizing these outcomes to the banking industry . Control mechanism may be weaker in the banking institute because boundaries are placed on who may served as bank directors (Subrahmanyam, Rangan, and Rosen, 1997) and on the possession of bank stock (Prowse, 1995). Prowse, studying corporate power changes at 234 bank-holding companies (BHCs) over the time 1987-1992 discovers that hostile takeovers and administration turnover are, respectively, 5 times and 2 times as likely in non financials as BHCs. Moreover, Prowse finds that external directors tend to have bigger stakes in non-financials institutions than in BHCs. Regional differences in the dictatorial environment affected the possibility a bank would become a takeover target and thus the talent of the market for corporate power to shrink agency costs. (Rose, 1992) examines that banks operating in states that lower legal entry barriers over the 1972-1987 period practiced efficiency improvement following the regulatory changes. Brickley and James (1987) found that expenses for s alaries are higher in five part branching states that limit corporate acquisition than in six unit branching states that do not limit by build corporate acquisitions of banks stock. (Hannan, 1980) analyzing banking firms working in Pennsylvania during the 1970s, close that manager restricted banks operating in non-competitive market spend more on input likely to be ideal by managers than do owner-controlled bank in the same condition. Allen (1991) highlighted the relations of corporate control mechanisms. The author expressed that difference resolution between managers and shareholders depend on both the stage of insider shareholdings and shareholder attentiveness. While the wellbeing of the two groups can be united if managers own major shares, managers with large holdings may become entrenched except outsider has satisfactorily large holdings to be motivated to supervise managers. A studies of banks mergers and acquisitions over 1979-1986 leads them to end that the most dynamic acquirers, calculated by number of acquisitions, have the most entrenched mangers (a high percent of the shares are held by insiders and shareholder concentration is low) and the slightest energetic acquirers have the smallest entrenched mangers. Subrahmanyam, Rangan, and Rosenstein (1997) found for a sample of banks acquisitions over 1982-1990 that abnormal outcomes around the declaration of acquisition bids is negatively connected to the proportion of outsides directors on the board, positively linked to the proportion of equity ownership by outsides directors, and at high levels, positively linked to the shares own by insiders. On the other hand, the ownership structure is established to be a more significant governance method than board composition. Methodology This chapter concerns with the methodology for conducting the research between five mergers and acquisitions of local and foreign commercials banks in Pakistan. The comparative analysis of commercials banks in Pakistan conducted through the financial analysis. The research is designed in away that fulfill the entire requirement while designing the research it will kept in mind it should serve the purpose and should be in line with the objective of the study. The method of conducting this research is based on secondary data. Through the secondary data past performance and the current position of the profitability of banks has been analyzed. 3.1 Research Approach The major research approach is to decide when conducting this research in banking sector of Pakistan. This research is quantitative in nature. The objective is to measure the performance of local and foreign banks merger and acquisitions in Pakistan and generalize the findings. 3.2 Research Design It consists of the arrangement of research methodology and setup of research design. The research is base on comparison of historical data. 3.3 Research purpose The main purpose of this thesis is to know about the profitability either after the mergers and acquisitions the overall profitability is increasing or not? The research is base on secondary data and the method used is the analysis of financial statements. As financial ratios are precious methodical tools used to measure the financial health of banks. 3.4 Sample Selection The sample banks that selected for financial analysis based on the availability of 3 years data in pre n post form. The Five merger and acquisition banks are selected for financial analysis. The Sample selected is: Mashreq Bank Pakistan Ltd and Crescent Commercial Bank Ltd. Bolan Bank Ltd and My Bank Ltd. NIB Bank Ltd and Credit Agricole Indosuez Bank Union Bank Ltd and Standard Chartered Bank Pakistan Ltd. American Express Bank Ltd and JS Bank Ltd. 3.5 Data Collection In this study, ten Local and Foreign commercial Banks operating in Pakistan are considered. The total data for conducting financial analysis of Local and Foreign commercial Banks in Pakistan for the period 2000-2008 are from income statements and balance sheets of selected banks. 3.6 Data Analysis The statistical tools that used in this financial analysis are mean and Independence sample t-test. Mean have been used to calculate the average mean of last three years of both mergers and acquisition of Commercial Banks. Independence sample t-test has been used at a 0.05 level of significance to identify the significant difference. The major softwareà ¢Ã¢â€š ¬Ã¢â€ž ¢s used in the financial analysis are SPSS and MS Excel. 3.7 Source of Data The other data and information have been collected from various sources like, local and international journals, articles, newspapers, books and electronic data and SBP library. 3.8 Performance Measures Ratio analysis is one of the mainly dominant instruments of financial analysis. It is a procedure of set up and interpreting a range of ratios that the financial statements can be examine more evidently and result made from such analysis. The study uses financial ratios for the banks performance. The analysis of bank performance focuses on the Profitability on financial ratios: Profitability Ratios Profitability Ratios illustrate how flourishing companies in terms of creating returns or profits in Investment that it has made in the business. If business is liquid and well-organized, it must also be Profitable. The profitability can be moderator by the following criterion. A. Return on asset (ROA) = Profit after tax / total asset B. Return of equity (ROE) = Profit after tax / equity capital This ratio computes the profitability of the assets of a firm.  ROA furnish a proposal  as to how efficient  management is using its assets to generate earnings. ROA been shown as a percentage. Some time this referred to as return on investment (ROI). The higher return on assets the better it is. The amount of net income  return  as a proportion  of shareholders equity.  Return on equity  gauge a corporations profitability  by revealing how much  profit a company creates with the money shareholders have invested. It is also identified as return on net worth Results This chapter deals with the financial analysis and conducted between the local and foreign commercial banks mergers and acquisitions in Pakistan over the last some years by using ratio analysis. Ratio analysis is a useful indicator of a financial condition. Ratios can be deliberate from information make available by the financial statements. The results point out quite a few salient points of comparison of ROA and ROE between before and after local and foreign banks mergers and acquisition in Pakistan. 4.1 Research Hypothesis: Mergers and Acquisitions leads to higher profitability Descriptive Statistics N Minimum Maximum Mean Std. Deviation ROApre 30 -8.97 2.35 -.1740 2.80085 ROEpre 30 -92.93 16.40 -1.2260 21.75217 Valid N (listwise) 30 Group Statistics profitability N Mean Std. Deviation Std. Error Mean ROE Pre 15 -1.4580 25.79942 6.66138 Post 15 -.9880 17.75522 4.58438 ROA Pre 15 -.0667 2.56590 .66251 Post 15 -.2800 3.10254 .80107 Independent Samples Test Levenes Test for Equality of Variances t-test for Equality of Means 95% Confidence Interval of the Difference F Sig. T df Sig. (2-tailed) Mean Difference Std. Error Difference Lower Upper ROE Equal variances assumed .011 .916 -.058 28 .954 -.47000 8.08644 -17.03433 16.09433 Equal variances not assumed -.058 24.832 .954 -.47000 8.08644 -17.13006 16.19006 ROA Equal variances assumed .962 .335 .205 28 .839 .21333 1.03954 -1.91607 2.34273 Equal variances not assumed .205 27.047 .839 .21333 1.03954 -1.91945 2.34612 4.2 INTERPRETATION: As from independent sample T-test, for ROE the significant value of test for equal variance is greater than 0.05 which is 0.916 and showing that variances are of equal size indicating the equality of variances and for ROA the significant value of test for equal variance is greater than 0.05 which is 0.335 and showing that variances are of equal size indicating the equality of variances. The test for equality of mean for ROE the significant value of test for equal mean is greater than 0.05 which is 0.954 and showing that mean are of equal size as well as t-test is insignificant which indicates that there is no difference between pre and post mergers and acquisition in banking sector of Pakistan is very low also indicating the equality of mean and for ROA the significant value of test for equal mean is greater than 0.05 which is 0.839 and showing that mean are of equal size as well t-value is very low also indicating the equality of mean. Conclusion The attempt of this study is to inspect and to assess the performance of the mergers and acquisitions of commercial banks in Pakistan, i.e. Mashreq Bank Pakistan Ltd and Crescent Commercial Bank Ltd, Bolan Bank Ltd and My Bank Ltd, NIB Bank Ltd and Credit Agricole Indosuez Bank, Union Bank Ltd and Standard Chartered Bank Pakistan Ltd and American Express Bank Ltd and JS Bank Ltd. The study evaluates performance of the merger and acquisitions banks in term of profitability and for the period of 2000-2008. Financial ratios such as Return on Asset (ROA) and Return on Equity (ROE) have been used to assess banking performances. Independence sample T-test used in guiding the implication of the differential performance of the mergers and acquisitions of banks in Pakistan. As it is concluded that there is no significant change between ROE and ROA for before merger and acquisition and after merger and acquisition, so it leads to that banks that enrolled in merger and acquisition did n ot get any significant change in their profitability.