| Pub. Date | : October, 2021 |
|---|---|
| Product Name | : The IUP Journal of Accounting Research and Audit Practices |
| Product Type | : Article |
| Product Code | : IJARAP031021 |
| Author Name | : Mousumi Bhattacharya and Sarit Biswas |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 15 |
The paper intends to measure the effects of Mergers & Acquisitions (M&As) on the stock prices and Financial Performance (FP) of the acquirer banks in India. A list of 28 M&As concerning acquirer banks registered on the National Stock Exchange (NSE), is used in this study. Event study analysis is used to gauge the outcome of M&As announcement on the market price of the banking company's share, which measures the wealth creation of acquiring firm's shareholders. DuPont (DP) analysis is used for the purpose of analyzing the FP of merged firm, but it failed to show any significant impact post merger in terms of Return on Assets (ROA), Return on Equity (ROE), net-profit margin, financial leverage and asset turnover. The fallouts designate that the market reacted negatively towards the M&As in banking sector of India, and also show a corrosion in the performances of the acquirer banks in the post-merger period.
Organizations adopt different strategies to grow their businesses. Growth can be achieved
either organically (e.g., expanding the existing operations, launching new products and
services, entering into the new market, etc.) or inorganically (e.g., through Mergers &
Acquisitions (M&As), Joint Ventures (JVs), Strategic Alliances (SA), etc.). M&As are the
emerging strategies adopted by organizations to expand their businesses beyond their internal
capabilities and resources. Due to the possibilities of rapid growth in limited time period,
many organizations adopted this strategy for mounting their business. Approximately 4,000
trades are noted every year in the business world. Although there are plentiful explanations
for occurrence of M&As between organizations, some of the major reasons include
Organizational Synergy (OS), where the amalgamated enterprises obtain extraordinary value
than each single entity alone could attain. The M&As process may reduce expenditures of
the novel ventures, help in enhancing shareholder wealth, increase chances of endurance in
the dynamic changing environment, accomplish greater economies of scope and scale,
shrink expenses and upsurge Return on Equity (ROE).
The M&As endured a favorite theme among scholars because of its noteworthy prominence
in the business world. Most of the M&A studies have been piloted in the developed
economies as the M&As tactics are majorly noticed in the advanced world compared to less