Impact of Merger and Acquisition Announcements on Stock Returns and Intraday Volatility: Evidence from Indian Banking Sector

Abstract

The primary objective of present study is to examine the impact of merger and acquisition announcements during 2000–2018 on stock returns and intraday volatility of banks listed on National Stock Exchange in India. The sample of 383 mergers and acquisitions events has been analyzed with the help of event study methodology. Findings suggest that consolidation in Indian banking sector leads to positive average abnormal returns and wealth creation for acquirer bank’s shareholders. These findings are in agreement with Onikoyi et al. (2014), Kumar et al. (2011), and Anand and Singh (2008), and contrary to the evidence provided by Sim (2015), Asimakopoulos and Athanasoglou (2012), and Cybo-Ottone and Murgia, (2000). Further, results show that merger and acquisition in banking sector lead to curvy jumps in volatility around announcement date, which implies that disclosure of restructuring events in the banking sector affects return variability. These results confirm the observations by Pessanha et al. (2016), Kamau (2016), and Louhichi (2008).

Keywords: Acquisition, Merger, Stock Return, Average Abnormal Return, Volatility, Event Study Analysis

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