Market Reaction Towards the Bank Mergers in India - An Event Study of Selected Merged Banks

Abstract

The objective of the present paper is to examine impact of mergers on share price of merged banks in short term. Total six cases of merger were selected for the study. For analysis, Event Study methodology is employed. For this purpose, the data have been collected from CMIE data base and Yahoo finance database. To know the market reaction towards merger announcement, AR and CAR were calculated based on Market Adjusted Model and T statistics was used to know the significant AR. Further, researcher also examined the performance of public sector and private sector Banks. Finally, the study reveals that, in a banking environment marked by frequent merger, such transaction directly or indirectly affects the shareholders sentiments and increases the market shares i.e. merger enhances the performance and wealth for both businesses and shareholders.