Determinants of Shareholders Wealth Performance Based Study on Merging Companies

Abstract

Mergers and Acquisitions as a business strategies are widely used to increase the wealth of the shareholders and the corporate performance. Shareholders wealth may be inruenced by many factors such as the corporate performance, deal type, geographic location of the company and so on. The study is conducted with three main objectives of assessing the impact of merger announcements on merging companies' share prices, . analyse the nature of shareholders' returns of the merging companies and assess the determinants of shareholders returns. NSE listed companies which have made merger announcements during the period of /st January 2007 to 3 /st December 20 I 2 shall constitute the sample population for the research, while 40 merger announcements have been taken as sample size. Mean adjusted model has been used for calculating the abnormal returns while the statistical tools of paired samples t-test, ANOVA and multiple regression have been used for analysing data. Results of the research reveal that merger announcements exert significant impact on share prices. Further, shareholders wealth has witnessed an increase a~er the merger announcements. Finally, shareholders wealth has not been affected by the company's performance.