Bank Mergers and Shareholder Value Creation in India

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