Srusti Management Review (Dec 2012)
Impact of Merger on Short-term Scrip Price Return- A Practical Evidence from the Mergers in Indian Context during 2010-11
Abstract
The modern mantra, Merger and Acquisition has become a prominent objective of the modern day business to enhance its value immediately in an inorganic way by creating a synergy among different variables. Due to LPG impact from late 90s, Indian firms are adopting this strategy to explore opportunities in expanding their operation overseas as well as in domestic market. From the standpoint of investors, successful acquisition increases profitability and stock price. Efficient Market Theory is a separate concept called Random Walk Theory, as per which the stock prices fluctuate randomly in the market and there is no special trend of movement of share prices. And all these fluctuations only depend upon the level of information available. This paper uses an event study methodology to empirically examine stock market reaction to acquisition announcements and tries to find out the impact of merger on short term scrip return.
