Category: Finance »

Impact of inter-industry mergers and acquisitions on the profitability

Inter-industry mergers and acquisitions have become common in today’s business world due to the benefits associated with them. The effect of mergers and acquisitions manifests in many ways determining a firm’s financial performance.

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Impact of mergers and acquisitions on shareholder’s wealth

The previous article focused upon the need for mergers and acquisitions, i.e. the need for value creation. This value creation arises in the form of improved business operations and financial performance. The financial performance is linked to shareholder value which in turn affects the capital structure of the businesses. Generating more wealth for the shareholders can help to build a strong capital structure which is essential for long term growth of businesses (Haleblian, et al, 2009). Therefore, it is important to examine the impact of mergers and acquisitions on the wealth of the shareholders.

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Synergies in mergers and acquisitions

Synergies are a form of value addition created in merger and acquisition (M&A) activities. The value addition is a representation of the finances in the form of revenues and costs that these merged businesses can achieve. The value addition is not possible when businesses operate as separate entities. Formation of synergies can help businesses attain higher output, better placement of staff and good facilities (Ogada, Njuguna and Achoki, 2016). However, the past decade has witnessed a transformation in the formation of synergies. Traditionally, organizations merged to reduce costs or to expand their geographical presence. However, in the modern value creation process, businesses merge to expand their business capabilities into new domains (Loukianova, Nikulin and Vedernikov, 2017).

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Determinants of cross-country mergers and acquisitions

The 21st-century corporate world has witnessed the phase of globalization. It has led to technological advancement and the removal of trade barriers across countries. This is important as the competitive advantages of different organizations differ in terms of availability of raw material, investment, technology and so on. Therefore, in order to ensure long term growth potential, organizations have started forming cross country mergers and acquisitions (M&A). In contrast to the domestic mergers, cross country mergers help businesses in realizing the scope of new market opportunities. This is evident from the rise in the volume of cross border M&A.

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Motivators and demotivators of online financial products

Financial products or financial instruments act as investments and securities developed to facilitate sellers and buyers with financial gains (Blankespoor, et al., 2013). Financial products are provided by financial institutions like;

  • credit card agencies
  • banks
  • insurance firms
  • government bodies and
  • stock brokers
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Credit risk faced by microfinance institutions (MFI) in India

The microfinance industry of India is a major enabler of financial inclusion in the country. It has also been a blessing for small scale industries which act as an important source of income for a significant population. However, microfinance institutions (MFI) are faced with many problems which restrict their potential. These issues, mainly associated with credit risk, are discussed here. Read more »

Difference between microfinance institutions and commercial banks in India

The financial sector in India has been formally serving the economic needs of its urban and rural populations for over three centuries. This sector comprises banking and non-banking network which is present in multiple layers to cater to specific and varied requirements of different customers. The major aim of this network is to mobilize the savings from households to the economy to promote development. The formal lending system includes commercial banks, microfinance institutions (MFIs’) and non-banking financial institutions (NBFC). Read more »

Challenges faced by the Indian microfinance industry

Poverty, a raging economic issue, exists in most of the developing countries. The actual reason for severe poverty lies in the inequality in income distribution, which is chronic in developing countries, especially in India. Agricultural sector still plays a major role in Indian economy, despite the remarkable progress made in the service and manufacturing sector in last two decades. According to Census 2011, still 50% of the Indian population depend on agriculture and allied activities and approximately 69% of India’s population is in rural areas. This population has been largely deprived of formal financial services leading to lackluster performance of the agricultural sector (Karthik, 2017). For this reason the concept of microfinance was introduced. The main aim of introducing Indian microfinance industry was financial inclusion of poorer and backward section of the society.

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