The Impact of Merger and Acquisition Announcements on Acquirer’s Share Price : An Analytical Study Using Random Effects

This paper aims at identifying the magnitude of excess returns provided by the shares of an acquirer in a merger or acquisition transaction. In order to do so, the paper studies 352 transactions between January 1, 2003 and April 25, 2018 over the value of $100 mn at announcement involving an Indian listed acquirer. The first part studies the stock returns for a period of two days prior to the announcement until two days after the announcement and is complemented by an analysis of Cumulative Abnormal Returns (CAR) over five-event windows. In the second part, a panel regression is also run to assess the extent to which the stock returns are affected by the market, the mode of payment and deal size. The paper finds a marginal positive abnormal return on the day of the announcement, which seems to fade away by the second day following the announcement. Hausman test is used for the random effects testing with the tested accuracy in panel data