Implication of M&As on Shareholders' Wealth- An Event Study Approach

Abstract

Globalisation and liberalisation have made businesses from emerging countries, such as India, more assertive and have also made them resort to mergers and acquisitions to resolve conflicts arising from competition. Over half of bank mergers in India are the result of government policy actions aimed at rescuing weak banks with high non-performing assets (NPAs), especially in public sector banks, rather than market forces. It is crucial to comprehend how such mergers affect the shareholders' wealth because public sector banks make up a sizable and dominating portion of the Indian banking industry and have between 45% and 49% of their ownership held by private investors. This article examines the effects of the merger of the Vijaya and Dena Bank with the Bank of Baroda on the wealth of the acquiring bank's shareholders using event research methods in order to identify abnormal returns around the merger announcement. The findings demonstrate that Anchor Bank or the acquiring bank displayed negligible negative returns in a longer event window. However, in the short run, a negatively significant abnormal return was noticed.