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SPCL Article2.9
SPCL Article2.9
Abstract
The paper studies the Merger and Acquisition phenomenon on both the acquiring and the target bank's stock prices of six major
domestic bank M&As, in a period spanning from 2004 to 2014. It compares the short-term impact of acquirer and target share
prices around the announcement period. Two different methods – Market Model and Market Adjusted Models were used to find
the impact of merger announcement on stock prices. The paper studies the phenomenon, from a time 10 days prior to the merger
announcement date, to 10 days post the merger announcement. The paper finds that in case of distressed asset takeover or where
the merger was forced by the RBI, both the acquirer and target entities lost value around the day of announcement. Among the
six target banks, abnormal returns are marked by large standard deviations, with returns, around the announcement date,
ranging from a large -70% to +50%. The study did find significant abnormal returns at four-days post the merger
announcement. However, no significant abnormal returns are found for any of the event windows. The paper also finds that
abnormal returns gradually vanish, few days after the announcement, supporting the efficient market hypothesis of Fama et al.
(1969).
Keywords:
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Market Adjusted Model
Period
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Interval?
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