Do Mergers & Acquisitions Add Value to the Shareholders: Evidence from Merger of State Bank of India and Its Five Associates

Abstract

The merger of State Bank of India and its associates in 2017 was considered as a mega merger in the Indian banking industry. The Government of India announced the merger with the objectives of increase operational effectiveness of the public sector giant and changing the bank with a significant national presence and global reach. The synergy value of merger can be seen either through higher revenues, lowering of expenses or lowering of overall cost of capital thereby making the business efficient and creating overall shareholder value. The primary aim of this study is to analyse the short-term and long-term wealth creation after merger to the shareholders of the bidder bank. The study employed event analysis and the results revealed there are no significant changes in the abnormal returns of the shareholders due to merger in both the announcement period and in the long -run.