Impact of Mergers and Acquisitions on Shareholders’ Wealth in Short-Run : An Empirical Study of Indian Pharmaceutical Industry

Indian pharmaceutical industry has carved out a unique place on the global map, not only as a manufacturer of generic drugs but also of new formulations, with growing emphasis on research and development and new drug discovery. The present paper examines the short-run abnormal returns to India based mergers and acquisitions focusing on the pharmaceutical industry during 2001-2007 by using event study methodology. Short-term effects are of interests for immediate trading opportunities they create. We find that acquisitions of foreign companies significantly create short-term wealth on the announcement day to the shareholders of acquiring companies. Cumulative abnormal return (CAR) for Indian companies' acquisitions activities aimed at foreign-based targets is positive over event window. It seems market perceives the deals of acquisitions of foreign targets by Indian pharmaceutical companies as efficiency enhancing