Mergernomics: An empirical study of mergers in indian banking industry

Abstract

Banking industry in India is very important for economic development in the country. Public sector banks have more market share in the industry than their private peers. Therefore, most of the private sector banks have been adopting strategy of mergers and acquisitions to withstand the competition. In this paper we have analysed two such mergers viz. HDFC bank with Centurian Bank of Punjab and Kotak Mahindra Bank with ING Vysya Bank. The study attempted to analyse a stock price behaviour of both the merged entities in both the short and long-term period. The study found that in the short term there is a small difference in abnormal return in pre and post-merger stock prices; however, over the longer term this effect is diminished. Event study methodology has been used with other tools like t-Test, mean abnormal returns etc.