For a company, merger is a strategy to improve efficiency. However, for the public, a merger causes contradictory effects. The first impact is industrial efficiency that will improve people’s welfare, the other is market power that will cause welfare loss. "Welfare loss can definitely harm society. Due to the two effects, merger should be evaluated to minimize negative impacts," said Dra. Murti Lestari, M.Si., at BRI Auditorium Faculty of Economics and Business UGM, Wednesday (22/12) in open examination of doctoral program.
According to Murti, the importance of early evaluation on banking merger is the strategic role of this sector in the economy as intermediate institution and infrastructure of monetary policy. Due to this role, banking industry should have good performance to support the economy in general.
In her dissertation entitled "Ex-Ante Analysis of Bank Merger Impact on Banking Industry in Indonesia Years 1993:1- 2009:1", Murti explained that her research aims to analyze the ex-ante impact of bank merger on Indonesian banking industry. In her research, Murti used two indicators to observe, i.e. precondition and the lesson from similar experiences in the past. Precondition was conducted by measuring industrial structure and credit demand elasticity, while the lesson from similar experiences in the past took the case of the merger of Mandiri Bank, Danamon Bank, and Permata Bank. "Besides measuring market structure in Indonesian banking industry, this research also aims to measure credit demand elasticity and response analysis of merger on performance in the merger of Mandiri Bank, Danamon Bank and Permata Bank," the lady born in Salatiga, 31 March 1966, explained.
From her study, Murti concluded that industrial structure of Indonesian banking industry is oligopoly. Credit demand elasticity in Indonesia is minus 0,1779 or less than 1 (inelastic). This means if an interest increase occurs in particular proportion, the decrease of credit demand is less than the increased interest. The opposite occurs if there is an interest decline. "From the conclusion, the merger wave that may appear due to the policy of Indonesian Banking Architecture (API) and Single Presence Policy is estimated to decrease competition and improve monopoly power," said member of faculty of Faculty of Economics of Duta Wacana University.
From her observation of the merger between three banks, she concluded that Permata Bank’s merger resulted better working performance response compared to the merger and consolidation of Danamon Bank and Mandiri Bank. The merger of Permata Bank did not cause performance shock that can produce a structural break, while the merger of Mandiri bank and Danamor Bank produced a structural break.
However despite not causing shock of credit, profit, and BOPO, the merger of Mandiri bank and Danamon Bank caused performance shock related directly to costumers, which was the occurance of spread. Therefore, to come back to their stable position, the merger on Mandiri Bank and Danamon Bank took longer than that of Permata Bank. "Therefore, if a merger needs to be made of major banks, the form of merger and acquisition by maintaining one of the existing banks would give better working performance response than consolidation," Murti Lestari said. She graduated with honours and became the 1320th doctor from UGM.