Bank Mergers and Shareholder Value Creation in India

Behavioural Finance, Forthcoming

14 Pages Posted: 4 Jul 2012 Last revised: 15 Oct 2012

See all articles by Malabika Deo

Malabika Deo

Pondicherry University - Department of Commerce

Aasif M.

Pondicherry University

Date Written: November 25, 2011

Abstract

The study attempts to examine the impact of merger events on the stock price behavior of acquirer as well as the target shareholders in the Indian banking industry. OLS Market Model and Constant Market Model were applied to study a sample of (17) merger announcements both by Private and Public sector banks. The results demonstrate that merger announcements in Indian banking sector have no significant impact on bidder portfolio. However for target banks, interesting results have been emerged. None of the average CAR appeared statistically significant when Global Trust Bank (GTB), a loss making bank is included in the overall target portfolio. However, the average CAR changes immediately to significant positive returns in all the run-up windows when the same bank is expelled from the target sample. Further, unlike most of the previous studies, we found no clear pattern of abnormal returns for the combined private sector banks

Keywords: Abnormal Return, Market Model, Constant Market Model, GTB

JEL Classification: G11, G34, G39

Suggested Citation

Deo, Malabika and M., Aasif, Bank Mergers and Shareholder Value Creation in India (November 25, 2011). Behavioural Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2100242 or http://dx.doi.org/10.2139/ssrn.2100242

Malabika Deo

Pondicherry University - Department of Commerce ( email )

Department of Commerce
Kanchi Mamunivar Centre for Post Graduate Studies
Pondicherry University, Tamil Nadu 605014
India

Aasif M. (Contact Author)

Pondicherry University ( email )

Department of Commerce
Kanchi Mamunivar Centre for Post Graduate Studies
Pondicherry University, Tamil Nadu 605014
India
+91-8122263418 (Phone)

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