Ford

The objective as already mentioned is not only to compare the performance of the acquired banks before and after change of ownership structure occurred but also to compare these changes with a control panel of similar banks.

The study framework is characterised by an econometric analysis that uses the T- Statistic test to identify any significant changes in means for the selected variables defined above. The technique of interviews is used not only to refine the quantitative analysis but also to understand better how knowledge spillovers may have occurred.

5.2.3.1 Interview guide and meetings activities

I met with the three big banks and although ABSA (the fourth biggest bank) representative was not available for meeting, he provided succinct answers from the interview guide (Annexe 5.1) that was returned by email. I met the management consultants that operate in the banking and financial sector. Interviews with the regulators, competition institution and former Barclays lawyers that oversaw the acquisition, consumer financial institutions and other academics and practitioners, were informative and while they did not prove to be very significant in terms of findings, they did help understand the legislative and political context in which these foreign participations took place (See list of participants in Annex 5.2). I designed and submitted to them an interview guide (Annexe 5.1) to be used as a guideline for our discussion. The interview guide seemed to be useful as they could prepare their answers. The banks as well as the consultants were mostly cooperative. However, I

had some difficulties in meeting with Barclays and ICBC representatives. I invited the Banking Association to meet with me but they declined and the South African Reserve Bank did not cooperate except to provide me with guidance on how to use their website to collect data. The interviews were conducted from 2010 to 2012. What is striking is the high degree of consistency from interviewees across consultants and competitors about the lack of spillovers and benefits for ABSA and the change in strategy of ABSA and the Standard Bank, as they perceived it.

When searching for efficiency and performance improvement following ownership changes, the literature and the banking professionals stipulate that (Rhoades, 1998):

1. Half of the savings will occur during the first year and all savings will be achieved within three years;

2. Most significant savings could be accomplished without changing ownership; 3. Any cost saving or efficiency should be observable in public financial data such

as annual reports.

5.2.3.2. T-Statistics model to provide changes in variables

The first step is to analyse all variables for three years preceding the change of ownership and three years after the change in ownership occurred. It is worth remembering in this particular case study that efficiency gains or performance improvements are partly indicators of spillovers. The specific strategy of the acquirers has to be taken into consideration, as efficiency gains might not be their primary objective, although the new owners may require a positive return on their investment. Finally a control group was set up, composed of the 2 other SA big banks: First Rand and Nedbank. These two banks are similar to ABSA and the Standard Bank in terms of size and location. The variables of the control group were examined as simple averages. They provide a base for comparing the efficiency and performance of the study group (ABSA and the Standard Bank). Setting up a control group is very important because it gives an indication of the nature of any observed changes in the

study group. The economic environment can influence the nature of changes or these changes can simply be unique to the study group itself.

T-Statistics were used to provide comparison of average means first between both banks in the periods before and after the event of majority or minority shareholding participation, and second between the study group (ABSA and the Standard Bank) and the control group in the periods before and after the event of majority or minority shareholding participation. The selected indicators for each bank of the sample over a three-year period before (year T-3, T-2 and T-1) and after (year T+1, T+2 and T+3) the acquisition event are calculated and the mean from the sum of each bank indicator for years T-3, T-2 and T-1 is compared with the mean from years T+1, T+2 and T+3, respectively. The year (T=0), which corresponds to the year when the event of ownership change occurred, is purposely omitted. Usually a number of events, which influence the firms’ economic performance, are taking place during this particular year. The event includes acquisition transaction costs necessary for the deal (Healy et al., 1992).

T-statistic methodology consist of applying the t-test equation for unequal variance that is given by the following:



t



X



X

S

n



S

n

= Mean of pre-foreign participation (majority or minority) variables

= Mean of post-foreign participation (majority or minority) variables



S_{= Standard deviation}



1 _{= Group of pre-foreign (majority or minority) participation variables}

5.2.3.3. Hypothesis

In order to evaluate the relative change with the variables defined above of the group study that had experienced a change in their ownership structure (minority or majority participation) the general form of the hypotheses that are examined for each variable separately is as follows:

Ch5/H1: There is expected to be a relative change in the defined variables after the event of a change in ownership structure for both banks ABSA and the Standard Bank.

Ch5/H2: There is expected to be a relative change with the defined variables after the event in ownership structure for the group study compared to the control group.

Therefore, the crucial research question that is investigated in examining the different variables above is that performance of both ABSA after Barclays’ acquisition and Standard Bank after ICBC participation is greater than it is in the period pre- acquisition and pre-foreign participation, regardless whether the performance is tested against itself or against the control group. In addition, the evidence from the interviews may explain the results from the t-statistics model.