Tuesday, 24 May, 2022




Impact of Mergers on Stock Performance and Risk of Acquiring Firms: Evidence from India

Drishtikon: A Management Journal

Volume 10 Issue 1

Published: 2019
Author(s) Name: Pinky Mall, Kapil Gupta | Author(s) Affiliation: Doctoral Student, Dept. of Mgt. I.K. Gujral Punjab Tech. Univ., Kapurthala, Punjab, India.
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This study examines the wealth effects of merger announcements on acquirer firms in India, by primarily focusing on two stock characteristics i.e. stock return and stock volatility. Sample of 429 merger announcements in India from 2008 to 2015 are examined and an event window of 21 days is taken to analyses the impact of such announcements on acquirer’s stock return and stock volatility. It is found that there is change in return and a jump in spread of returns after event day, and it continues up to two days post event. These findings imply that shareholders of acquirer firms generate average abnormal returns from merger events during and after announcement and returns become negative in long run in context to India. These results are similar with the results by Rani et al. (2013); Karels et al. (2011); Khanal et al. (2011); Mulherin and Boone (2011). In case of return volatility, a sharp increase in fluctuations is observed on the day of merger announcement. These findings are consistent with the findings by studies conducted by Kamerschen; (2008); Bharath and Wu (2005); Langetieg et al. (1980).

Keywords: Shareholders Wealth, Volatility, Stock Return, Average Abnormal Return, Event Study

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