IDEAS home Printed from https://ideas.repec.org/a/sae/globus/v20y2019i3p692-707.html
   My bibliography  Save this article

Spillover Effect of M&A Announcements on Acquiring Firms’ Rivals: Evidence from India

Author

Listed:
  • P. K. Ranju
  • T. Mallikarjunappa

Abstract

Motivated by the paucity of empirical studies examining the impact of mergers and acquisition (M&A) announcements on the acquiring firms’ rivals, we made an attempt to uncover the spillover effect of M&A announcements on the stock market reaction of acquiring firms’ rivals. Using a sample of 97 M&A announcements during the period from April 2014 to March 2016 and 179 rivals of acquirers, we found that acquiring firms and acquiring firms’ rivals react positively to the announcement of M&As. The results of the disaggregated analysis suggest that horizontal M&As do not result in a significant positive reaction of acquiring firms’ rivals. Therefore, this study does not support the collusion theory. We also found negative (insignificant) stock market reaction of acquiring firms’ rivals upon the announcement of cross-border M&As. However, overall results show that acquiring firms’ rivals react positively to the announcement of M&As. This significant positive reaction of acquiring firms’ rivals goes in line with signalling theory. Thus, we argue that M&A announcements signal information regarding the growth potential of rivals, which results in positive stock market reaction of acquiring firms’ rivals upon the M&A announcements.

Suggested Citation

  • P. K. Ranju & T. Mallikarjunappa, 2019. "Spillover Effect of M&A Announcements on Acquiring Firms’ Rivals: Evidence from India," Global Business Review, International Management Institute, vol. 20(3), pages 692-707, June.
    • Handle: RePEc:sae:globus:v:20:y:2019:i:3:p:692-707
    DOI: 10.1177/0972150919837080
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0972150919837080
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0972150919837080?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:globus:v:20:y:2019:i:3:p:692-707. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.imi.edu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.