INTRODUCTION
1.1Background of the Study
Business combination is a transaction or other event in which a reporting entity (the acquirer) obtains control of one or more businesses (the acquirer).
The Nigeria financial system had attracted many write ups and interest of academics, investor, stakeholders and other governmental agencies at different levels. The process of reforming the financial services has been gathering pace in Nigeria and beyond since two decades ago. Business combinations are usually aimed at combining and creating an economic advantage such that the combination of the present value of the combined business is greater than the sum of their individual values as separate entities. This is the result normally achieved through business combination.
Apart from financial distress and corporate failures in recent times within the banking sector globalization has also led to the financial crises across the world which made manifest by inability of many banks to finance multinational transactions that requires lumpy sum of money due to low level of liquidity and insufficient capital (Inoukhude,2003). The financial globalization which gave birth to integration of a country’s local financial system and international financial markets and institution has led to various forms of business combination as a reaction to the phenomenon. The complexity and distinctiveness of these transactions have forced so many countries to restructure their financial system to mitigate the problems of shortage of funds. Therefore, the process of bank consolidation is in response to the wave of consolidations spreading across the globe (Nuraddeen,2011).
In Nigeria, consolidation policy of banks was introduced in 2004 which made it mandatory for banks to raise their equity capital base from minimum of 2billion to 25billion. As a result of the consolidation, the number of Nigeria banks shrunk from eighty-nine (89) deposit money banks (DMBs) that existed before the programme to only twenty-five (25) banks that emerged having been able to meet the 25billion minimum capitalization requirement through various schemes of business combination. The central bank of Nigeria (CBN) revolved to place the banking system to meet up with that standard as at December 2005. This, no doubt, is a package that will bring sanity, stability, efficiency and a sound financial system to the Nigeria economy. It is also a strategy that encourages concentration of individual small banks as the name suggest is a strategy that economy culture for efficiency, strengthen financially weak banks for effectiveness, check against bank distress and organizational failure (okpala, 2013 forthcoming).
1.2     Statement Of Problem
Financial crises over the years had thrown the banks into financial misplace of their functions. The identified performance problem areas had continuously been weak and or negative capital base resulting from operating performance, persistent illiquidity, unprofitable performance, poor asset quality and lack of extension of credit facilities to the real sectors of the economy (soludo 2004).
These problems are hard and fundamental and therefore require proper and continuous attention to avoid further debilitating impact, not only on the depositors and financial system but also on the overall national economy. Other negative impact of these peculiar problems may include absence of lending to the real sector, manifestation in the deposit base of the banks and increased distortion of financial conditions of banks arising from attempt to conceal the true financial information.
The foregoing development and the global financial and economic crunch have resulted in increased attention to improve and enforce financial reporting disclosure worldwide in order to reform the global economy. In Nigeria major cases of similar financial and accounting scandal include the collapse of the banking sector in the 26 banks liquidated in 1997s, falsification of the company financial statements in Cadbury Nigeria Plc in 2006s and the more recent post consolidation banking crises of 2009 in Nigeria when 10 banks were declared in insolvent and 8 executive management teams of the bank removed by the CBN.
1.3       Objectives of the Study                                                     ÂÂ
The main objective of the study is to investigate the effects of IFRS 3 (Business combination) on key performance ratios of Deposit Money Banks (DMBs) in Nigeria. Specifically the study will.
1.4       Research Question
The questions were raised to enable the researches address these issues are;
1.5 Research HypothesesÂÂ
The following null hypotheses were formulated for testing to support the data collected for this study.
Ho1: Business combination (proxy by shareholders’ fund) does not significantly affect net profit of quoted deposit money banks in Nigeria.
Ho2: Business combination (proxy by shareholders’ fund) does not significantly affect return on asset of quoted deposit money banks in Nigeria.
Ho3: Business combination (proxy by shareholders fund) does not significantly affect return on equity of quoted deposit money banks in Nigeria.
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1.6       Significance of the Study
The banking industry being the engine of growth and development of any nation needs careful study for comprehensive and adequate solution.The findings of this research work will be useful in three aspects as follows;
1.7        Scope of the Study
The study comprises of all money deposit banks quoted in (DMBs) in Nigeria. The study covers a twenty year period from 1996-2015. This has to deal with the pre-consolidation period (1996-2005) and post consolidation period (2006-2015) of banking sectors in Nigeria.
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1.8      Limitation of the Study                      ÂÂ
Some of the limitations of this study were lack of sufficient materials and availability of accurate secondary data-notwithstanding, scholars articles, journals and other relevant publication were gathered and used in this study.