This paper attempts to investigate the level of efficiency and financial performance of Malaysia local banks after the banking sector's merger and acquisition in year 2000. This paper will analyse the impact of merger on banks' profitability, cost reduction, liquidity, leverage and shareholder's wealth. Comparative analysis on financial ratios are used to assess the performance of Malaysia local banks during the pre-merger period (year 1999-2001) and the post-merger period (year 2002-2010). In

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... ddition, Data Envelop Analysis (DEA), T-Value Testing and paired-sample t-test will also be adopted as methodology of this study. This study would allow IBBM (Institute Bank-Bank Malaysia) to have a better understanding and a clear picture of the effect of "forced merger" among domestic incorporated Malaysia commercial banks. The results of this study shown no significant improvement in the performance and efficiency of the merged banks, IBBM can play a role as an advisor in giving their opinion or advise to the regulatory authorities in determining the future merger and acquisition scheme by knowing whether the acquiring bank can really benefit from acquiring a lesser efficient bank according to theory and vice versa. Decision-makers hence ought to be more cautious in promoting mergers as a means to enjoying efficiency gains. Index Terms-Bank merger, data envelopment analysis (DEA), financial ratio analysis, paired sample t-test, Malaysia.