Impact of Mergers and Acquisitions Announcement on Shareholders’ Wealth: Evidence from Indian Corporate Sector

Abstract

To combat the emerging competition from all over the world in the post liberalized era, mergers and acquisitions is resorting by a number of firms as a powerful tool to strengthen their competitiveness. The present study tries to evaluate the effectiveness of mergers and acquisitions on the short term performance of the eight companies taken from Indian corporate sector for the years 2017 and 2018. Using market model of event study methodology, the study finds that abnormal and cumulative abnormal returns do not sustain for longer time. Short term windows have been proved more beneficial when a comparison is made among varied sizes windows in respect of providing returns to an investor The negative average abnormal and cumulative abnormal returns obtained in the study in case of most of the companies implies for the failure of the mergers and acquisitions, an important instrument usually adopted by many firms to increase their wealth and competitive power in the market proved that the strategy may be ineffective under certain market situations.