ChainMergerEvaluationandApplicationtoBanking.ppt

Chain Merger Evaluation and Application to Banking Operations Desheng Dash Wu University of Toronto, Reykjavik University[with John R. Birge, Booth School of Business, University of Chicago] Accepted and to appear at POM DSJ, 43(1) 2012 0 1 Outline Introduction Problem, Literature Background model Our model Conceptual model, Math model 3 main contributions chain merger DEA model, leader-follower relations efficiency at both chain and sub-chain levels, incentive compatible banking intra-firm division mergers Case analysis Conclusion Further study 2 Outline Introduction Background model Our model Case Study Conclusion 3 Industry facts New York Times, March 11, 2013: “the dollar value of U.S. mergers and acquisitions so far this year is $233 billion, more than double last year. But there were almost 10 percent fewer deals than last year.“ “Todays mergers and acquisitions are more about building up than cashing in.” 4 Literature IO: Salant (83), JOE; Deneckere and Davidson (85) RandJ;Perry and Porter (85), AER; Farrell, (90), AER; Rothschild (00) Reg SciE; Benjamin et al. (09) merger paradox Finance: Sapienza (02), JOF; Guerard Jr. (89); Geppert and Kamerschen(08); Houston and Ryngaert (94) JBF; Duffie (07) JFE stock OR: Sherman and Rupert (06), EJOR; Cummins et al.(08) JBF; Ray (04); Bogetoft (05), JPA efficiency 5 Our study A model for gauging merger efficiency of supply chains different structure Supply chain view of banking operations Link operations to finance Apply the model to banking operations with DEA, considering MA with multiple metrics Link OR to IO/Finance 6 Question: banks or subdivisions merged, how business performance is affected considering such a banking chain? How to achieve potential gains? 7 Revisit Banking operations- supply chain Outline Introduction Background model Our model Case Study Conclusion 8 Merger gains (Ray, 2004)2-step process: harmony effect, scale effect 9 Mathematically The efficiency of merger can then be measured as