The impact of merger and acquisition announcements on Indian firms in the IT & ITES sector

Abstract

This study examines the impact of M&A on the stock prices of the acquiring firms in the Indian Information Technology and Information Technology Enabled Services (IT&ITES) sector and tests whether the shareholders of these firms can earn abnormal returns on M&A announcements. In order to determine these, the study uses 37 acquiring firms in the period 2010 to 2012 as the research sample and applies the Event Study Methodology. The Average Abnormal Returns (AAR) are compared across the ex-event, event and post-event windows to assess the impact of M&A announcements and also the post-event effects. The results indicate that the shareholders of the acquiring firms cannot earn significant abnormal returns based on the informational value of the M&A announcements and M&A do not have a positive impact on the stock prices of these firms.