Mergers and acquisitions have come to be an approach used for consolidation in the Indian banking industry. This research paper is entitled “Stock Price Reactions in the Pre- and Post- Mergers and Acquisitions Period: An Empirical Analysis of the Indian Banking Industry” and is intended to explore stock price reactions to M&A activities.

A quantitative research design is employed in the study which uses secondary data from six banking mergers and acquisitions (M&As), namely HDFC Bank-HDFC Ltd, Canara Bank-Syndicate Bank, Bank of Baroda-Vijaya Bank-Dena Bank, Punjab National Bank-Oriental Bank of Commerce-United Bank of India, Union Bank of India-Andhra Bank-Corporation Bank, and Indian Bank-Allahabad Bank. An Event Study approach was utilized in computing the AR, CAR, AAR, and CAAR. Multiple Regression Analysis, Paired Sample t-test, and Pearson Correlation were performed.

The findings revealed a negative reaction to the event, with a mean CAR of −4.83% for the (−1,+1) window period. In addition, day +1 revealed a significant abnormal negative return of −6.41%. Acquisition firm size revealed the strongest positive relationship with CAR, whereas relative deal size had a weak negative relationship with CAR. The regression model had 60.6% explanatory power on CAR, but it was statistically insignificant. Return on assets (ROA) and return on equity (ROE) increased significantly by 0.632 and 11.001 percent, respectively. In conclusion, the study reveals that it is important to evaluate M&As using market reaction and performance measures.

 

Keywords

 

Mergers and Acquisitions, Indian Banking Sector, Stock Price Reaction, Event Study, Abnormal Return, CAR, ROA, ROE, Shareholder Wealth, Financial Performance.