Market-driven Indian Bank Merger Announcements and Stock Returns

The Government of India, Reserve Bank of India and bank managers, in general, favour bank consolidation for various reasons. They support consolidation to create a few large global banks, to achieve rapid growth and to gain from economies of scale and scope. However, international studies and Indian...

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Main Authors:	T., Senthil Kumar, Mohd Ridzuan, Darun, Mohammad, Aslam
Format:	Conference or Workshop Item
Language:	English
Published:	IFERP Explore 2019
Subjects:	HG Finance
Online Access:	http://umpir.ump.edu.my/id/eprint/26165/ http://umpir.ump.edu.my/id/eprint/26165/ http://umpir.ump.edu.my/id/eprint/26165/1/Proceeding.pdf

id	ump-26165
recordtype	eprints
spelling	ump-261652019-12-17T08:37:27Z http://umpir.ump.edu.my/id/eprint/26165/ Market-driven Indian Bank Merger Announcements and Stock Returns T., Senthil Kumar Mohd Ridzuan, Darun Mohammad, Aslam HG Finance The Government of India, Reserve Bank of India and bank managers, in general, favour bank consolidation for various reasons. They support consolidation to create a few large global banks, to achieve rapid growth and to gain from economies of scale and scope. However, international studies and Indian studies on bank mergers indicate that the evidence in favour of bank mergers is mixed, at best. Hence, this study was conceived to analyse the effect of market-driven Indian bank-to-bank mergers on stockholders during the post-reform period, 1999 2014. Event study analysis was performed using the market model with BSE-500 stock index as the reference index. Each merger announcement was considered as an event and daily stock returns in a 30-day time window were computed before and after the event. Overall, if the abnormal returns had been positive it could be implied that merger announcements have a positive impact on the stock prices. However, the results indicate that stock returns of acquiring banks and acquired banks generally declined in the time period around merger announcement. In the case of acquiring banks, adverse reaction was observed in six out of nine mergers that were analysed. Among the nine acquired banks, five were listed and adverse reaction was noted in three cases. Overall, merger announcements appear to have had an undesirable effect on stock returns of acquiring and acquired banks. Hence, future merger decisions should be taken only if other alternatives are not available and such decisions must be driven by due diligence. IFERP Explore 2019-09-26 Conference or Workshop Item PeerReviewed pdf en http://umpir.ump.edu.my/id/eprint/26165/1/Proceeding.pdf T., Senthil Kumar and Mohd Ridzuan, Darun and Mohammad, Aslam (2019) Market-driven Indian Bank Merger Announcements and Stock Returns. In: 22nd World Conference on Applied Science, Engineering and Technology, 26-27 September 2019 , Singapore. p. 32., 2019. ISBN 978-93-89107-20-3 https://wcaset.com/singapore/
repository_type	Digital Repository
institution_category	Local University
institution	Universiti Malaysia Pahang
building	UMP Institutional Repository
collection	Online Access
language	English
topic	HG Finance
spellingShingle	HG Finance T., Senthil Kumar Mohd Ridzuan, Darun Mohammad, Aslam Market-driven Indian Bank Merger Announcements and Stock Returns
description	The Government of India, Reserve Bank of India and bank managers, in general, favour bank consolidation for various reasons. They support consolidation to create a few large global banks, to achieve rapid growth and to gain from economies of scale and scope. However, international studies and Indian studies on bank mergers indicate that the evidence in favour of bank mergers is mixed, at best. Hence, this study was conceived to analyse the effect of market-driven Indian bank-to-bank mergers on stockholders during the post-reform period, 1999 2014. Event study analysis was performed using the market model with BSE-500 stock index as the reference index. Each merger announcement was considered as an event and daily stock returns in a 30-day time window were computed before and after the event. Overall, if the abnormal returns had been positive it could be implied that merger announcements have a positive impact on the stock prices. However, the results indicate that stock returns of acquiring banks and acquired banks generally declined in the time period around merger announcement. In the case of acquiring banks, adverse reaction was observed in six out of nine mergers that were analysed. Among the nine acquired banks, five were listed and adverse reaction was noted in three cases. Overall, merger announcements appear to have had an undesirable effect on stock returns of acquiring and acquired banks. Hence, future merger decisions should be taken only if other alternatives are not available and such decisions must be driven by due diligence.
format	Conference or Workshop Item
author	T., Senthil Kumar Mohd Ridzuan, Darun Mohammad, Aslam
author_facet	T., Senthil Kumar Mohd Ridzuan, Darun Mohammad, Aslam
author_sort	T., Senthil Kumar
title	Market-driven Indian Bank Merger Announcements and Stock Returns
title_short	Market-driven Indian Bank Merger Announcements and Stock Returns
title_full	Market-driven Indian Bank Merger Announcements and Stock Returns
title_fullStr	Market-driven Indian Bank Merger Announcements and Stock Returns
title_full_unstemmed	Market-driven Indian Bank Merger Announcements and Stock Returns
title_sort	market-driven indian bank merger announcements and stock returns
publisher	IFERP Explore
publishDate	2019
url	http://umpir.ump.edu.my/id/eprint/26165/ http://umpir.ump.edu.my/id/eprint/26165/ http://umpir.ump.edu.my/id/eprint/26165/1/Proceeding.pdf
first_indexed	2023-09-18T22:40:34Z
last_indexed	2023-09-18T22:40:34Z
_version_	1777416887330668544

Market-driven Indian Bank Merger Announcements and Stock Returns

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