An Empirical Investigation of Market Efficiency and Investor Perception of Merger Announcements in India

This research empirically investigates about the efficiency level of Indian capital market and how investors behave with merger announcements. The role of information leakage around the merger announcement date is also tested. For this paper, the traditional event study methodology has been adopted with three distinct models of normal return methods for companies in NSE CNX-100 index. A comparative study has been tried for achieving a more reliable result with varying event windows. The results for the abnormal returns due to merger announcements have proved to be statistically significant along with similar average cumulative abnormal returns. This study finds the evidence of semi-strong form of market efficiency for Indian capital market coupled with some amount of information leakages prior to the actual announcement. This result is quite useful to very short term investors as they can gain substantially during 1-day period with merger announcements.