Short-term impact of merger and acquisition on shareholders' return in Indian financial service sector: the role of deal type and percentage of ownership acquired

This study analyses the short-run impact of merger and acquisition (M%A) announcements on the stock returns of acquirer companies in the Indian financial service sector. Further, disaggregated analysis is also conducted to assess the impact of deal-specific factors such as the deal type (domestic vs. cross-border) and percentage of ownership acquired (minority vs. majority) on stock prices. The sample of the study comprised 338 completed M%A deals in the Indian financial service sector from 1st January 2001 to 31st December 2023. The results of the event study methodology showed the positive impact of M%A announcements on shareholders' returns as the stock market experienced 0.51% positive and significant abnormal gains on the event day. The disaggregated analysis indicated that domestic M%A generated higher shareholders' returns than cross-border deals. The Indian acquirer firms in the financial service sector yielded greater stock returns in the case of majority vis-à-vis minority M%A deals. These results are recommended to investors and stock market participants to formulate investment policies and strategies. This research draws the attention of managers to prefer M%A deals as an option to strengthen their competitiveness.