This study attempts to investigate the impact of Mergers and Acquisitions (M&A) deals on shareholder wealth creation using Buy and Hold Abnormal Returns (BHAR) in order to understand the investor experience and capture investment goals of investors. This study was conducted with respect to 21 M&A announcements in the Indian Banking sector. BHAR estimate under Event methodology approach was used to highlight excess returns over and above the market average after the merger announcements. Further the Average Buy and Hold Abnormal Return (ABHAR) estimate was calculated to analyse the impact of nature of amalgamation on post M&A announcement by grouping bidder banks as voluntary and compulsory merger type. The study found: (1) the announcement of M&A deals do not create significant and improved BHAR for shareholders of the acquirer banks during their respective M&A deals. (2) ABHAR emphasised that on an aggregate basis, the M&A announcement has generated Buy and hold abnormal returns for the portfolio of Indian banks. (3) The Buy and Hold Abnormal Returns for bidder banks did not differ significantly when grouped as voluntary merger deals vis-à-vis compulsory merger deals.
Keywords: Bank, BHAR, M&A, Performance
The Indian economy has seen significant increase in the Mergers and Acquisitions paradox in its various industrial sectors. Since the nationalisation era, the Indian banking sector has been through numerous policy changes, failure of banks, increase in Nonperforming Assets (NPAs), resistance to government control on credit programs, and competition from foreign banks. The focus on importance of consolidation emerged with the Narasimham Committee I (1991) recommendations.Read Full Article