The paper tries to explore the relationship between mergers and corporate performance. Mergers and acquisitions have been adopted as one of the important strategies of corporate finance to create wealth to the shareholders. There are a plenty of studies abroad pertaining to value creation to shareholders through mergers and acquisitions. The literature depicts that there is a mixed view with regard to wealth creation to shareholders. However, there is a dearth of studies in the Indian context as to whether mergers create value to shareholders. The objective of this study is to find out whether mergers and acquisitions generate abnormal return to the shareholders of the acquiring firms. The paper tries to figure out whether any positive return is generated by the firm because of mergers and acquisitions in short run by using event study methodology. The study considers domestic mergers for the period 2004-2014 to analyze the effect of merger on shareholder wealth by using BSE listed companies.

In this globalized economy, domestic as well as multinational firms want to galvanize significant benefits from a combination of businesses or through restructuring. Mergers and acquisitions are adopted as a part of their corporate strategy as it creates synergies; it could be operating or financial synergy or both which can be achieved in terms of economies of scale or scope, reducing the cost of capital, lowering the transaction cost, and tax considerations. Mergers and acquisitions have been extensively used around the corporate world for exploiting the advantageous position in terms of strategic realignment, technological change, increase in the purchasing power of consumer and booming stock market and regulatory changes. Though mergers were initiated way back in 1980, they have dramatically transformed and redefined the business landscape. In order to penetrate the universal competitiveness and explore opportunities, firms are choosing inorganic strategies such as mergers and acquisitions, joint ventures and strategic alliances. The paper seeks to generate the abnormal returns of the Indian acquiring companies during pre, post and around the announcement period. This is to figure out whether the acquiring companies generate wealth to the shareholder in the shortrun event window period.

Applied Finance Journal, Mergers and Value Creation, Average Abnormal Return (AAR), Cumulative Average Abnormal Return (CAAR), Indian Context.