Shareholders’ wealth creation through bank mergers in India

Mergers and acquisitions are the need of an hour. The Indian banking industry has adopted the merger and acquisition strategy in order to become competitive at the domestic as well as international level. The mergers are having an impact on the financial, operational as well as on the shareholders wealth creation ability of a bank. The impact of mergers can be seen especially in the share prices of the companies. The paper sought to analyze the impact of mergers on the shareholders wealth of two acquirer banks in India. These two acquirer banks were ICICI Bank and State Bank of India. The impact of mergers on the shareholders’ wealth has been analyzed with the help of event study analysis. Thus the impact of mergers has been determined by measuring the abnormal returns earned by the shareholders around the announcement date. Further, the abnormal returns have been calculated using the Market Adjusted Abnormal Return Model so as to draw conclusions. The findings highlighted that the mergers had no significant impact on the shareholders wealth of acquirer banks.