What drives mergers and acquisitions waves in developing countries? Evidences from Iranian banking industry

Document Type : Research Paper


1 M.Sc. in Corporate Entrepreneurship, Faculty of Entrepreneurship, University of Tehran, Tehran, Iran.

2 Assistant Professor, Department of Agricultural Extension and Education, Faculty of Agricultural Economics and Development, University of Tehran, Karaj, Iran.

3 M.Sc. in Economics, Graduate School of Management and Economics, Sharif University of Technology, Tehran, Iran.

4 Associate Professor of Corporate Entrepreneurship Department, Faculty of Entrepreneurship, University of Tehran, Tehran, Iran.


any Middle-East countries, like Iran, have dynamic banking industries and have observed merger and acquisitions (M&A) waves. M&A waves are usually defined in the developed world context and some of their main drivers were identified as: market timing, environment's shocks, merger manias, government regulation and regulatory, and technological changes. It has been discussed that merger waves and their reasons are among the ten most important unsolved mysteries in the field of finance (Brealey and Myers, 1991, p. 923), and as a result of this, it was not possible to completely clarify the reasons behind emerging M&A waves, especially in developing countries; for this reason in these countries, there is a different story. In the past thirty years, the Iranian banking industry witnessed two waves of M&A. The later one commenced in 2011 and is still in progress. This study investigates the reasons behind emerging M&A waves in the industry by using the Exploratory Factor Analysis (EFA). The data for this study were collected from 113 bank managers. The results show that Iranian banking industry M&A wave is driven by three main forces/factors: macro, industrial, and corporate, which come from: I) Develop the business and acquire competitive advantage, II) Stakeholders’ pressures, III) Government pressure, IV) Lack of banking licenses, and V) Organize the money market by government.


  1. Akbulut, M.E and Matsusaka, J. G. (2010) ‘50+ years of diversification announcements’ Financial review, Vol. 45, No. 2, pp.231 - 262.
  2. Andrade, G., Mitchell, M. and Stafford, E. (2001) ‘New Evidence and Perspectives on Mergers’, Journal of Economic Perspectives, Vol. 15, No. 2, pp.103 - 120.
  3. Barkoulas, J.T., Baum, C.F. and Chakraborty, A. (2001) ‘Waves and persistence in merger and acquisition activity’, Economics Letters, Vol. 70, No. 2, pp.237 - 243.
  4. Beck, T., Demirgüç-Kunt, A. and Levine, R. (2010) ‘Financial institutions and markets across countries and over time: The updated financial development and structure database’, The World Bank Economic Review, Vol. 24, No. 1, pp.77 - 92.
  5. Ben Hamida, H. (2014) ‘Evolving efficiency of the Saudi Arabian stock market via Shannon entropy approach: a study on sector-based data’, Afro-Asian Journal of Finance and Accounting, Vol. 4, No. 2, pp.112 - 140.
  6. Brealey, R. and S. Myers (1991), Principles of Corporate Finance, 4th ed., McGraw-Hill. New York.
  7. Carletti, E., Hartmann, P. and Spagnolo, G. (2007) ‘Bank mergers, competition, and liquidity’, Journal of Money, Credit and Banking, Vol. 39, No. 5, pp.1067 - 1105.
  8. CBI. [online] http://www.cbi.ir/Page/GeneralInformation.aspx/ (Accessed 24 February 2015).
  9. Chowdhury, R.H. (2015) ‘Equity capital and bank profitability: evidence from the United Arab Emirates’, Afro-Asian Journal of Finance and Accounting, Vol. 5 No. 1, pp.1 - 20.
  10. Cudeck, R. (2000) ‘Exploratory factor analysis’, In Handbook of applied multivariate statistics and mathematical modeling, Academic Press, pp.265–296.
  11. Dunnill, M., Massarella, G. and Anderson, J. (1969) ‘A comparison of the quantitative anatomy of the bronchi in normal subjects, in status asthmaticus, in chronic bronchitis, and in emphysema’, Thorax, Vol. 24, No. 2, pp.176 - 179.
  12. Dymski, G.A. (2002) ‘The global bank merger wave: implications for developing countries’, The developing economies, Vol. 40, No. 4, pp.435 - 466.
  13. Gorsuch, R.L. (1988) ‘Exploratory factor analysis’, In Handbook of multivariate experimental psychology, Springer, pp.231–258.
  14. Gort, M. (1969) ‘An economic disturbance theory of mergers’, The Quarterly Journal of Economics, Vol. 83, No. 4, pp.624 - 642.
  15. Gugler, K., Mueller, D.C. and Weichselbaumer, M. (2012) ‘The determinants of merger waves: An international perspective’, International Journal of Industrial Organization, Vol. 30, No. 1, pp.1 - 15.
  16. Harford, J. (2005) ‘What drives merger waves?’, Journal of financial economics, Vol. 77, No. 3, pp.529 - 560.
  17. Henson, R. K. and Roberts, J.K. (2006) ‘Use of exploratory factor analysis in published research common errors and some comment on improved practice’, Educational and Psychological measurement, Vol. 66, No. 3, pp.393 - 416.
  18. Hoshino, Y. (1982) ‘The performance of corporate mergers in Japan’, Journal of Business Finance & Accounting,Vol. 9, No. 2, PP.153 - 165.
  19. Hoyle, R.H. (2000) ‘Confirmatory factor analysis’, in Tinsley and Brown (Eds.), The Handbook of applied multivariate statistics and mathematical modeling, Academic Press, pp.465–497.
  20. Huck, S., Konrad, K.A., Müller, W. and Normann, H. T. (2007) ‘The merger paradox and why aspiration levels let it fail in the laboratory*’, The economic journal, Vol. 117, No. 522, pp.1073 - 1095.
  21. Kuran, T. (2005) ‘The logic of financial westernization in the Middle East’, Journal of Economic Behavior & Organization, Vol. 56, No. 4,pp.593 - 615.
  22. Megdad, A.M. (2009) ‘Strategies for implementing the internet within the Saudi private sector’, Journal for Global Business Advancement, Vol. 2, No.4, pp.318 - 327.
  23. Markham, J.W. (1955) ‘Survey of the Evidence and Findings on Mergers’, in Universities-National Bureau, Business concentration and price policy, Princeton University Press, Princeton, pp.141–212.
  24. Mitchell, M. L. and Mulherin, J.H. (1996) ‘The impact of industry shocks on takeover and restructuring activity’, Journal of financial economics, Vol. 41, No. 2, pp.193 - 229.
  25. Mueller, D.C. (1985) ‘Mergers and market share’, The Review of Economics and statistics, Vol. 67, No.2, pp.259 - 267.
  26. Nelson, R.L. (1895) Merger Movement in American Industry, 1895-1920, Princeton: Princeton University Press.
  27. Rahman, R.A. and Limmack, R. J. (2004) ‘Corporate acquisitions and the operating performance of Malaysian companies’, Journal of Business Finance & Accounting, Vol. 31, No. 3‐4, pp.359 - 400.
  28. Ravenscraft, D.J. and Scherer, F. M. (1987) ‘Life after takeover’, The Journal of Industrial Economics, Vol. XXXVI, No. 2, pp.147 - 156.
  29. Rhodes-Kropf, M., Robinson, D. T. and Viswanathan, S. (2005) ‘Valuation waves and merger activity: The empirical evidence’, Journal of Financial Economics, Vol. 77, No. 3, pp.561 - 603.
  30. Rhodes‐Kropf, M. and Viswanathan, S. (2004) ‘Market valuation and merger waves’, The Journal of Finance, Vol. 59, No. 6, pp.2685 - 2718.
  31. Shleifer, A. and Vishny, R.W. (2003) ‘Stock market driven acquisitions’, Journal of financial Economics, Vol. 70, No. 3, pp.295 - 311.
  32. Stigler, G.J. (1950) ‘Monopoly and oligopoly by merger’, The American Economic Review, Vol. 40, No. 2, pp.23 - 34.
  33. Thorp, L. (1941) ‘The increasing responsibility of management’, Journal of Accountancy, Vol. 72, No.5, pp.403.
  34. Verbeke, W. and Viaene, J. (1999) ‘Beliefs, attitude and behaviour towards fresh meat consumption in Belgium: empirical evidence from a consumer survey’, Food quality and preference, Vol. 10, No. 6, pp.437 - 445.
  35. Vives, X. (2001) ‘Competition in the changing world of banking’, Oxford Review of Economic Policy, Vol. 17, No. 4, pp.535 - 547.
  36. Zulkhibri, M. and Ghazal, R. (2014) ‘Standardisation of Islamic banking practices: a regulatory perspective’, Afro-Asian Journal of Finance and Accounting, Vol. 4, No. 1, pp.1 - 25.