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An analytical study on value creation in Indian bank mergers

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  • B. Rajesh Kumar
  • K.M. Suhas
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    Abstract

    This study, based on Indian banking mergers, examines the impact of mergers on both the stock market wealth creation and operating performance. The study also analyses the performance of the merged banks in relation to a control group based on financial ratios. The results of cumulative abnormal returns analysis signify that merger announcements are value-creating activities for the acquirer banks. At the same time, merger announcements erode shareholder wealth for the target banks. The framework of pre-merger and post-merger comparison of the operating performance of the acquirer banks was based on three models whereby the cash flow was deflated by market value of assets, book value of assets, and income. The result does not provide evidence to support the view that corporate performance improves after mergers.

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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Afro-Asian J. of Finance and Accounting.

    Volume (Year): 2 (2010)
    Issue (Month): 2 ()
    Pages: 107-134

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    Handle: RePEc:ids:afasfa:v:2:y:2010:i:2:p:107-134

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    Web page: http://www.inderscience.com/browse/index.php?journalID=214

    Related research

    Keywords: bank mergers; cumulative abnormal returns; CAR; acquirer banks; target banks; cash flow models; value creation; banking industry; India; stock market wealth creation; operating performance; financial ratios; shareholder wealth.;

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    Cited by:
    1. Reddy, Kotapati Srinivasa & Nangia, Vinay Kumar & Agrawal, Rajat, 2013. "Indian economic-policy reforms, bank mergers, and lawful proposals: The ex-ante and ex-post ‘lookup’," Journal of Policy Modeling, Elsevier, vol. 35(4), pages 601-622.

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