An analysis of short run impact of recent merger announcement on stock prices

After Liberalization Mergers and Acquisitions (M&A) are important exercise in corporate restructuring and India is emerging as one of the top countries in M&A deals. M&A announcements will have an immediate effect on the stock price of those firms especially in an efficient market. More ever, during an M&A deals, Investors expect significant returns. In this context an attempt is made to assess the short run impact of merger announcement on stock prices by selecting 52 companies, which are listed in BSE, and entered in to merger activity during first two quarters of the year 2012. Event study methodology was used to compute cumulative abnormal return (CAAR) for 10 days before and after the event day. The study found out that the impact of the announcement of merger does not hold any significant difference on the movements of the share price and no significant abnormal return is achieved during the event window.