Vol. 6, Issue 2, Part D (2024)

This study investigates the impact of mergers and acquisitions (M&A) on stock prices within the Indian context, recognizing the growing significance of M&A activities in India's evolving corporate landscape. Employing quantitative event study methods and analysing a comprehensive dataset of 20 M&A announcements, the study reveals dynamic patterns in stock performance leading up to and following these announcements. Notably, it observes that stocks tend to exhibit positive abnormal returns approximately 30 days before the announcements, temporarily underperforming market expectations 20 days before the events, and rebounding with positive returns 10 days prior. On the announcement day, a positive abnormal return signifies a favourable market response, while stocks remain relatively stable ten days after the announcement and continue to perform well twenty days afterward.
The analysis of Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR) suggests that the Indian stock market operates with a semi-strong form of efficiency. Stock prices exhibit fluctuations, peaking on the announcement day and gradually declining afterward as the market absorbs information and adjusts. This observation aligns with the semi-strong form of the Efficient Market Hypothesis, indicating that stock prices quickly incorporate publicly available information, including M&A announcements. In conclusion, this research contributes valuable insights into the complex dynamics governing stock price movements in response to M&A events in India. These findings can benefit investors, corporate strategists, and policymakers by providing a deeper understanding of market reactions in the ever-evolving landscape of mergers and acquisitions in India.