Mergers and acquisitions (M&As) are an alternative way for business expansion and brings benefits for expansion of the market, generation and exploitation economies of scale and scope, gain of market power, proper diversification of products and services and overall improved performance. This study examines the impact of M&As (five years before and five years after) on operational performance and stability for Islamic and conventional banks by taking into consideration the mediating role of market structure. It employs panel data techniques and structural equation modeling (SEM). The study analyses a set of samples consisting of 10 Islamic banks and 14 conventional banks involved in M&As for the period of 2004Q1 to 2020Q4 from six countries which are Qatar, Kuwait, Bahrain, Saudi Arabia, United Arab Emirates, and Pakistan. The Dependent variables: operational performance is estimated using return on assets (ROA), return on equity (ROE) and net interest margin (NIM) while Z-score is used to measure bank stability. Several factors namely bank size, level of bank sizes, intermediary roles (financial and non-financial) and modes of financing are used as independent variables. Moreover, bank specific and macroeconomic variables are used as a control variable. Bank size and the level of bank sizes (i.e., small, medium, and large) are estimated using total assets, total deposits, and operating income. Mediating variables namely Herfindahl-Hirschman Index (HHI) and concentration ratio are used as a proxy for the market structure of the country. The findings imply that the implementation of M&As improves operational performance of Islamic and conventional banks while stability does not show any differences in pre and post M&As. Market structure mediates the relationship of post M&As with operational performance and stability of both types of banks. Moreover, small sized banks imply better impact on the operational performance while large and medium sized banks show better impact on stability of banks. Furthermore, in the pre-M&As scenario, there is no difference between operational performance of Islamic and conventional banks since the sign of the coefficient is the same. In contrary the post M&As scenario, it shows differences between Islamic and conventional banks. Meanwhile, there is no difference of stability in pre and post M&As of Islamic and conventional banks. The implication of the study is twofold. Firstly, M&As have more potential for Islamic banks than conventional banks. Secondly, they should take into consideration the market structure since it mediates the relationship between M&As and operational performance and stability of both types of banks.

Merger and acquisition (hereafter M&A) are the business expansion strategy. Islamic bank is the niche banking sector compared to its peers while it is categorized as too small to succeed. The paper aims to analyze the impact of M&A on the operational performance of the Islamic banking sector. This study employs empirical research methods, namely cross-sectional pooled regression and panel data regression to analyze a set of samples consisting of 10 Islamic banks involved in M&A from 6 countries, drawn from the International Monetary Fund (IMF), World bank, Ficth Connect, and Bloomberg over the years of 2009Q1to 2018Q4. The operational performance is estimated using accounting-based measures while the Herfindahl-Hirschman Index (HHI) and the concentration ratio (CR) are applied to signify market structure. Total assets, total deposits, and operating income variables are used to represent bank size. The findings indicate that bank size shows a negative impact on operational performance. While the segregated level of bank size which is larger banks and concentrated market structure has a greater impact on the operational performance of Islamic banks in the post-M&A period. The paper concludes by discussing policy implications for policymakers and academicians for having the strategic decision on the M&A deal and further research.

The corporate expansion approach is mergers and acquisitions. The paper aims to analyse the impact of mergers and acquisitions on the Islamic banking sector’s operational performance. This study uses empirical research methodologies, such as panel data regression, to examine samples of ten Islamic banks involved in M&A from six countries, gathered from the International Monetary Fund, World Bank, FicthConnect, and Bloomberg from 2004Q1 to 2020Q4. Accounting-based measurements are used to quantify operational success, whereas the Herfindahl-Hirschman index and the concentration ratio are used to signify market structure. To estimate M&A results, Stata Package 14.2 is used (five years pre and five years post). According to the findings, M&A improve the operational performance of Islamic banks. In addition, small-sized banks outperform large and medium-sized banks, with market structure (LHHI) degrades M&A performance. Therefore, the paper suggests that Islamic banks should be involved in M&A deals and remove the constraints of size

Purpose: This study contributes to the existing literature by providing a comprehensive overview of the complex relationship between level of bank sizes, factors, M&A performance, and stability for banking sectors, Islamic vs conventional banks, and by highlighting the importance of considering the specific characteristics of the banking industry in GCC and Pakistan. Theoretical framework: The conceptual framework is developed and designed based on the theory and in line with the literature review. The theories are resource dependency theory and efficiency theory Design/Methodology/Approach: This paper employs an unbalanced panel data of 24 banks consisting of 10 Islamic banks and 14 conventional banks from GCC and Pakistan, 2004Q1 to 2020Q4. Data is collected from several secondary sources, namely Bloomberg, FitchConnect database, Bank’s financial statement, IMF, and World Bank database. Findings: Our results revealed that bank size has a significant impact on the M&A performance and stability of banks. However, there is no significant difference between pre- and post- M&A performance. Interestingly, smaller banks outperformed larger and medium-sized banks in terms of M&A performance, while larger and medium-sized banks exhibited better bank stability than smaller banks. Interestingly, while looking at Islamic vs conventional banks point of view results show that operational performance of Islamic is better than conventional banks. On the other hand, stability of conventional bank is better than Islamic banks. Research, Practical, & Social implications: The limitations of this research should also be acknowledged and future research should expand the number of observations and including more Islamic banks is essential. Moreover, exploring the impact of cultural and regulatory differences on M&A activities is also an interesting avenue for further research. Additionally, future research should investigate the impact of M&A activities on other performance measures, such as efficiency, productivity, and profitability. Originality/Value: This study aims to fill the theoretical and empirical research gap by examining the impact of level of bank size on pre- and post - M&A activities in the GCC and Pakistan for banking sectors, Islamic banks vs conventional banks.