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Why do acquirers prefer M&A? Evidence from Banks in India

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  • Mittal, Amit
  • Garg, Ajay Kumar

Abstract

This study provides deeper insight into the linkages between Bank M&A and M&A literature and test the hypotheses that Acquirers gain significantly from a M&A strategy. Analyzing the Banking industry as an example of Horizontal mergers, the study aims to validate that M&A is a value creating strategy. A market model based event study provides robust results. We include private and public targets in the period 2006-2015. In a study of 24 M&A transactions in Indian Banks during the period 2006 -2015, we find convincing evidence for both acquirer and target gains. The t-statistic for Abnormal Returns is significant and Positive Abnormal Returns are shown. Size and profitability measures are not significant in this sample. Acquirers earning positive returns engage in multiple acquisitions and contribute significantly to positive abnormal returns in the sample. Acquirer returns depend on both Target and Acquirer Financial characteristics including Target Loan Loss provisions, Acquirer Tier I Capital, Acquirer proportion of Fee and Interest Income. The key limitation of the study is the unavailability of a larger sample of data.

Suggested Citation

  • Mittal, Amit & Garg, Ajay Kumar, 2017. "Why do acquirers prefer M&A? Evidence from Banks in India," MPRA Paper 85354, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:85354
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    Keywords

    Banking; Mergers & Acquisitions; Markets for Corporate Control; Horizontal mergers; Acquirer returns; India;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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