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1.1 Background of the Study

Palaniappan and Ramachandraiah (2008) posit that public relations came into prominence when Thomas Jefferson in 1807 used the phrase Public relations in place of State of thought while writing his seventh address to the US Congress and also traced the word public relations to India,


where the Great Indian Peninsular Railway Company Limited (GIP Railways) carried on publicity in Public Relations campaign in England to promote tourism to India through mass media and pamphlets. During the time of First World War a central publicity board was set up at Bombay (now Mumbai) for disseminating war news to the public and press. After Second World War the Public Relations activity gained importance both privates as well as Government started Public Relations campaigns (see, Palaniappan and Ramachandraiah, 2008). Since this earlier use, public relations have gained importance in marketing and promotions as it serves as means of promoting goods and services of organisations.

Investing on Public relations will help the organisation to achieve its objective effectively and smoothly. Public Relations is not creating good image for a bad team. Since false image cannot be sustained for a long time. Though the organisation product or services are good it need an effective Public Relations campaign for attracting, motivating the public to the product or service or towards the purpose of the programme. It not only encourages the involvement from the public but also resulting in better image. Effective Public Relations can create and build up the image of an individual or an organisation or a nation at the time of adverse publicity or when the organisation is under crisis. Effective Public Relations can remove the misunderstanding and can create mutual understanding between the organisation and the public.

Harlow (1978) defined Public Relations as a distinctive management function which helps establish and maintain mutual lines of communication, understanding, acceptance and cooperation between an organization and its publics; involves the management of problems or issues; helps management to keep informed on and responsive to public opinion; defines and emphasizes the responsibility of management to serve the public interest; helps management keep abreast of and effectively utilize change, serving as an early warning system to help anticipate trends; and uses research and sound and ethical communication as its principal tools. It can be observed from the above that the definition of Public Relations as it relates with the general public through publicity that, it is those functions of a corporation, organisation, branch of military service, etc., and it is concerned with informing the public of its activities, policies, etc., attempting to create favorable public opinions. Hence, Public Relations are the planned effort to influence opinion through good character and responsible performance, based upon


mutually satisfactory two-way communications. When firms merge or are acquired by another, the perception of that organisation by customers often changes, therefore as a tool of winning back the confidence of customers several organisation uses various promotional tools especially public relations.

Also different scholars, professionals and groups have defined public relations according to what it does and what it achieves (Kotler and Mindak, 1978). According to Cutlip et al. (2000), hundreds have written definitions attempting to capture the essence of public relations by listing the major activities that make up the practice. The researcher’s intention here is to analyze and highlight the pertinent aspects of public relations functions related to this study which are reflected in some of these definitions.

Generally, there are two schools of thoughts when it comes to defining public relations. Firstly, the widely recognized view public relations as a communication function and secondly, several American scholars’ view public relations as a management function (Kotler and Mindak, 1978). The original definition used by the British Institute of Public Relations (BIPR), now known as the Institute of Public Relations, United Kingdom, has been adopted by IPRM. This definition points towards the first view as it describes public relations as the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organisation and its publics (see, Stacks, Botan and Turk, 1999). Grunig and Hunt (1984) state that the BIPR emphasized mutual understanding as an effect in this definition, while Murray (2002) and Kitchen and Schultz (2001) too highlighted that this definition points out that public relations aims to create mutual understanding and explain that an important element in achieving this is that public relations should be seen as a two-way process.

In this context, Murray (2002) explains that professional public relations advisers not only help an organisation package and send out information but are also involved in counseling management on public attitudes, expectations, concerns and needs. He adds that businesses and public sector organisations are finding that they have to come out from behind the veil of silence and secrecy and involve stakeholders in meaningful dialogue.


Another significant element in the BIPR definition is its emphasis that public relations should be planned. This emphasis can also be seen in the Mexican Statement which underlines that public relations practice is the art and social science of analyzing trends, predicting their consequences, counseling organization leaders, and implementing planned programmes of action which will serve both the organization’s and the public’s interest. According to Kitchen and Schultz (2001), the statement begins by stressing that research is necessary in the first instance and its findings must be studied before a public relations programme can be planned. He adds that the statement then brings out the advisory function of public relations which is the most professional aspect (see, Kitchen and Schultz, 2001).

According to Oladepo (2010), Banks are the linchpin of the economy of any country. They occupy central position in the country’s financial system and are essential agents in the development process. By intermediating between the surplus and deficit savings' units within an economy, banks mobilize and facilitate efficient allocation of national savings, thereby increasing the quantum of investments and hence national output. Through financial intermediation, banks facilitate capital formation (investment) and promote economic growth. The decade 1995 and 2005 were particularly traumatic for the Nigerian banking industry; with the magnitude of distress reaching an unprecedented level, thereby making it an issue of concern not only to the regulatory institutions but also to the policy analysts and the general public. Thus the need for a drastic overhaul of the industry was quite apparent. In furtherance of this general overhauling of the financial system, the Central Bank of Nigeria introduced major reform programmes that changed the banking landscape of the country in 2004. The main thrust of the 13-point reform agenda was the prescription of minimum shareholders' funds of 25 billion for Nigerian Deposit money bank not later than December 31, 2005. In view of the low financial base of these banks, they were encouraged to merge. Out of the 89 banks that were in operation before the reform, more than 80 percent (75) of them merged into 25 banks while 14 that could not finalized their consolidation before the expiration of deadline were liquidated (see, Oladepo, 2010).

To a large extent, this consolidation is based on a belief that gains accrue through expenses reduction, increased market power, reduced earnings volatility, and scale and scope economies.


However, the characteristics of the kind of reforms induced mergers and acquisition of the banking industry creates doubts about its potentials of realizing efficiency gains. A deeper look at the 25 banks that emerged after the consolidation shows that most banks that were regarded as distressed and unsound regrouped under new names or fused into existing perceived strong banks not necessarily to correct the inefficiency in their operating system but just to meet the mandatory requirement to remain afloat and to continue business as usual. While this consolidation no doubt has benefits, what is less clear is the effect of this consolidation on the operating efficiency of the banks. In view of this observation certain issues arise on the desirability or otherwise of this imposed ‘one fit all consolidation’ exercises: will the increase in market power creates monopoly which theoretically increase price (bank interest rates) and reduce output (financial intermediations)? Therefore, to encourage smooth mergers and acquisitions, both government through the central bank of Nigeria and banks in the country used various public relations tools to promote and inform the public of its activities, policies thus attempting to create favorable public opinions on the merger and acquisitions. Therefore this research intends to examine the impact of Public relations by Nigerian Banks after Mergers and Acquisitions.

1.2         Statement of the Problems

Too many public relations programmes have been eliminated or severely cut back because no “value” could be attached to them. The harsh realities of corporate existence make it necessary for public relations practitioners to demonstrate the worth of what they do. Every aspect of organisational activity, particularly in difficult economic situations, is measured by its relative benefit to the firm. A public relations department that cannot demonstrate value to the organisation will not be in a position to influence the policy decisions that affect its own fate especially at such crucial times as when mergers and acquisition have occurred. Hence, problems exist.

Firstly, Mergers and acquisition or any other form of consolidation may influence bank interest rates, competition and transmission mechanism of monetary policy in so far as the increase in size and the opportunity for reorganization involved may either provide gains in efficiency that bear on marginal costs or give rise to increase in market power, or both together. Gains in


efficiency would be obtained in moving on to greater scale of activity (if there are economies of scale). Moreover, the primary role of banking institution is intermediating fund from the surplus unit to the deficit unit. In the presence of increased competition and reduced number of banks, there is every tendency for these banks to engage in activities that yield higher return irrespective of whether these activities promote the primary intermediation role. The consequences of this, is that consolidation may or may not yield greater financial intermediation or reduce the banks to a mere financial investment. Since the essence of any reforms is to bring greater efficiency not only in the operation but also their contributory role to the overall economy, banks needs to build a good public relations units to help allay fears of stakeholders as well as assisting to cultivate a mutually beneficial relationship with customers. However in Nigeria these have not been achieved.

Secondly, Practitioners of Public Relations in the Nigerian financial institutions have not actually considered public relations as a crucial element for business success. It is incontrovertible that the banking system is the engine of growth in any economy, given its function of financial intermediation. Through this function, banks facilitate capital formation, lubricate the production engine turbines and promote economic growth. However, banks’ ability to engender economic growth and development depends on the health, soundness, stability and confidence in the system. The need for a strong, reliable and viable banking system is underscored by the fact that the industry is one of the few sectors in which the shareholders’ fund is only a small proportion of the liabilities of the enterprise. It is, therefore, not surprising that the banking industry is one of the most regulated sectors in any economy. Therefore, building confidence of both investors and owners is vital for success however practitioners in Nigeria have not considered public relation as a tool in enhancing this confidence which ensures stability in the system.

Thirdly, there are conflicting arguments on the roles of public relations after mergers and acquisitions. The primary objective of the after mergers and acquisitions in the financial sector is to guarantee an efficient and sound financial system. The reforms are designed to enable the banking system develop the required resilience to support the economic development of the nation by efficiently performing its functions as the fulcrum of financial intermediation. Thus, the reforms were to ensure the safety of depositors’ money, position banks to play active developmental roles in the Nigerian economy, and become major players in the sub-regional,


regional and global financial market. However, the role which public relations play in achieving the objectives of stable financial system in Nigeria have not been streamlined thus the conflicts in the role it plays.

1.3         Research Objectives

The primary objective of this research is to discover how public relations are utilized by Banks after mergers and acquisitions. In this regard, the researcher’s intention is to find out if the public relations function is only used to generate publicity or if it also plays a more strategic role in relationship building as well as positioning Banks for increased productivity and achieving corporate and competitive goals. Therefore, the specific objectives of this study are:

1.      To analyze the significance of public relations efforts in cultivating a mutually beneficial relationship with customers after mergers and acquisition among Nigerian Banks.

2.      To gauge if practitioners and/or managements consider public relations as a crucial element for business success after mergers and acquisition among Nigerian Banks and

3.      To examine whether public relations plays a major roles in handling issues after mergers and acquisition among Nigerian Banks.

1.4         Research Questions

Based on the research problem identified for this study, and objectives this research will proceed to investigate what shapes and constitutes the public relations role in Nigerian Banks after mergers and acquisitions. As such, this research was designed to answer the following three research questions, these are;

1.      To what extent do public relations efforts help in cultivating a mutually beneficial relationship with customers after mergers and acquisition among Nigerian Banks?

2.      To what extent do practitioners and/or managements consider public relations as a crucial element for business success after mergers and acquisition among Nigeria Banks? and

3.      To what extent do public relations play major roles in handling issues after mergers and acquisition among Nigerian Banks?

1.5         Research Hypotheses


As a result of the problems stated above, the objectives of this study and the research questions, the following hypotheses are formulated, these are;

Ho1:     Public relations do not help in cultivating a mutually beneficial relationship with customers after mergers and acquisition among Nigerian Banks

Ho2:     Practitioners and/or managements do not consider public relations as a crucial element for business success after mergers and acquisition among Nigeria Banks


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