Effectiveness of Merger & Acquisitions as a Tool for Growth: A Study from Indian Corporate Sector​



Purpose: Merger is a corporate restructuring strategy that affects the performance of the firm on many parameters.  This study measures the effect of merger announcement on market returns and the impact of merger on the financial performance of the acquiring firm. 


Methodology: The data of 108 mergers during the year 2009-10 to 2011-12 is analysed to see the impact of merger.  We have used the event study methodology to measure the announcement impact.  The financial performance is measured on seven variables divided into three categories- profitability, liquidity and solvency.  The financial performance of five years’, 3 years, and one year, pre-merger is compared with the similar performances post-merger.  Paired sample ‘t’ test and Wilcoxon signed rank test is performed to compare the financial performance. 


Findings: We found stock prices of acquiring firms do not show any significant movement during event window period. However, the merger has significant positive impact on the profitability and liquidity position of the acquiring firm in five years but has no significant impact on solvency position of the acquiring firm. 


Limitations of this study: We have taken only listed companies for the comparison of financial performance also.  This is done because we have used the same data set for both comparisons. Second, there could be factors other than merger also which might have impacted the stock prices and financial performance of the acquiring firms.  The same has not been captured in our study. 



Merger; Financial performance; Profitability; Liquidity; Solvency 


JEL Classifications:

G34, L25, M41     


Citation as:  

Aggarwal, P. and Garg, S. (2019). "Effectiveness of Merger & Acquisitions as a Tool for Growth: A Study from Indian Corporate Sector", Review of Economics & Finance, vol.17, no.3, pp. 93-107.