IMPACT OF MERGER AND ACQUISITION ANNOUNCEMENTS ON STOCK RETURN, STOCK VOLATILITY AND STOCK LIQUIDITY OF ACQUIRERS: EVIDENCE FROM INDIAN BANKING SECTOR

  • Pinky Mal I.K. Gujral Punjab Technical University
  • Kapil Gupta

Abstract

This study is an attempt to analyse how stock of acquirer banks behaves during pre and post- merger and acquisition (M&A) announcements period in Indian Banking sector. Data of all merger and acquisition announcements in Indian Banking Sector from year 2000 to 2018 are taken from prowessdx database for the study.  Only those banks are taken for this study, which are listed on National Stock Exchange (NSE). Total sample size consists of 31 mergers and 351 acquisition announcements in banking industry. Stock prices were extracted from NSE. Event study methodology using an event window of -10 to +10 days has been used for analysis. Supporting the findings by Ranju and Mallikarjunappa (2019); Asimakopoulos and Athanasoglou (2012) results suggest that shareholders of Indian acquirer banks in India generate small and insignificant abnormal returns from integration deals. Return variability is also noticed from the curvy jumps in average abnormal spread of returns during announcement period. These results are in line with findings of Pessanha et al. (2016) and Kamau, (2016). Whereas, average abnormal change in liquidity witnesses a sharp hike on the day 0 i.e. the date of deal announcement and it remains negative through-out the post deal period. These finding are consistent with the findings of Lee and Chung, (2013); Lei and Li, (2013); Lipson and Mortal, (2007).
Keywords: Merger, Acquisition, Stock Return, Stock Volatility, Stock Liquidity, Average Abnormal Return, Average Abnormal Liquidity, Average Abnormal Spread, Stock Spread, Event Study Methodology.
Published
Apr 30, 2020
How to Cite
MAL, Pinky; GUPTA, Kapil. IMPACT OF MERGER AND ACQUISITION ANNOUNCEMENTS ON STOCK RETURN, STOCK VOLATILITY AND STOCK LIQUIDITY OF ACQUIRERS: EVIDENCE FROM INDIAN BANKING SECTOR. Management & Accounting Review (MAR), [S.l.], v. 19, n. 1, p. 73-102, apr. 2020. ISSN 2550-1895. Available at: <http://arionline.uitm.edu.my/ojs/index.php/MAR/article/view/1028>. Date accessed: 04 aug. 2020. doi: http://dx.doi.org/10.24191/mar.v19i1.1028.