Efficiency of Banks Merger And Acquisition in Indonesia

Abstract

The existence of API policy that requires each bank in Indonesia to have core capital at least 100 billion rupiah, causes banks to reform its capital structure either by merger or by acquisition. Bank's performance indicators show that the post-merger and post-acquisition banks are relatively low BOPO and higher CER together with low NPL reflecting that bank operate under good banking practice. However, to investigate whether the efficiency in term of cost-efficiency and profit-efficiency, this study employe SFA (Stochastic Frontier Analysis). Based on the RSCE (Ray Scale elasticity) also performed the economic condition of post-merger and post-acquisition banks. The results of SFA show that from 19 banks, Bank of Tokyo has the highest efficiency, followed by Bank HSBC and Bank Mizuho (from the cost-efficiency point of view) when using the alternative profit efficiency, Bank BRI shows the highest score of its efficiency. The results of economics scale calculation show that the post-merger and post-acquisition banks in Indonesia are at the state of increasing return to scale or decreasing cost. Bank merger and acquisition with asset of 10 triliun and 50 trilion prove a relative higher score of efficiency compared with other banks in peergroup. In contrast, cost-efficiency among peer group banks with assets more than 50 trillion indicates that most of the post-merger and post-acquisition banks have lower efficiency scores than non-merger or non-acquisition banks.