International Journal of Management, IT and Engineering
Year : 2017, Volume : 7, Issue : 2
First page : ( 339) Last page : ( 355)
Online ISSN : 2249-0558.

The implication of a merger announcement on shareholder's wealth: An event-study analysis of Kotak Mahindra Bank

Susruth Mulukalapally

Assistant Professor, Bharathi Institute of Business Management, Warangal, Telangana, India

Online published on 12 May, 2017.

Abstract

The study attempts to examine the impact of merger event on the stock price behavior of bidder as well as the target shareholders. The present study explores the implications of a merger announcement on shareholder's wealth by using the event study approach. kotak mahindra bank has been merged with ING vysya bank on April 1, 2015 and became the 4th largest private bank in India with 1214 branches, with a wide-spread pan-India network, business size of Rs. 2, 25, 000 crore, 40, 000 employees and a customer base of 1 crore. The impact of merger has been analysed by calculating the abnormal returns earned by shareholders during the event period. The study identified statistically significant abnormal returns only on the merger announcement date in case of bidder bank. On the other hand results for target bank experience significant abnormal returns on and around merger announcement date. This research shows adequate evidence of stock market reaction to merger announcement and earned large positive impact on target bank shareholders with adequate abnormal returns and no significant abnormal returns to bidder bank except on event date.

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Keywords

Abnormal Return, Market Model, Shareholder's wealth, event study approach.

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