Correspondence: Naser I Abumustafa, Department of Finance and Economics, Gulf University for Science and Technology, Safat, Kuwait. Tel: +965 2240130, x5540, Fax: +965 2645795

¹Mansour Alshamali completed his bachelor degree in Industrial and System Engineering from the University of Southern California, his MBA from California State University and his doctorate in Finance from the University of Loughbourough, UK. He is Kuwait Vocational Incubator-Advisor, was a senior financial economist with Central Bank of Kuwait, a member of Government Privatization Committee, a consultant to The Amiri Diwan, in State of Kuwait, worked with International Monetary Fund in different projects, represented the Islamic Chamber of Commerce for 57 Islamic countries. Currently, he is Associate Professor and Head of the Banking & Insurance Department at the College of Business Studies, PAET, State of Kuwait. He has published many research papers, international journals and different text books.

²Mansour Alfadly got his master's degree from Northrope University, Los Angeles USA and his PhD from the University of Loughbourough, UK with specialisation in Finance. Dr Mansour Alfadly was a consultant for Kuwait Stock Market and also was consultant for the Kuwait Institute of Scientific Research. Currently, he is Associate Professor at College of Business Studies, PAET, State of Kuwait and Cultural Attaché for the Kuwaiti Students in Bahrain. He has published many articles in finance and investment.

³Naser I. Abumustafa currently holds the position of Director of the MBA program at Gulf University for Science and Technology. He has written extensively about trading rules, transaction costs, index markets, and stock markets regulation and efficiency. He is the author of 15 articles in leading scholarly journals, including Applied Financial Economics; Development Journal; Journal of Derivatives & Hedge Funds; Journal of Applied Economics Letters; and Risk Management Journal. He has an international reputation as an expert on Middle Eastern Stock Markets.

Received 21 June 2008; Revised 21 June 2008.

Abstract

This paper presents an empirical investigation of the various social and business barriers to bank merger and acquisition in Kuwait. The investigation contains an assessment of the emerging banking structure and questions the ultimate need to deregulate the banking sector. The study explores the various reasons for the lack of interest in merger and acquisition in Kuwait, contradicting the general trend in the banking industry worldwide. We analyse the performance of major banks and investigate the CEO's perception of banking consolidation and deregulation of this sector. We find that inappropriate market regulations against foreign direct investments, poor internal decision making and governance, high concentration in equity ownership, and inexperienced management dominance are major characteristics of this sector that act against any possible merger attempt, in addition to some other factors. Further, short-term benefits seem to act as secondary barriers to strategic consolidation.