Neelam Rani - Academia.edu (original) (raw)

Papers by Neelam Rani

Proceedings of The International Academic Conference on Management and Economics, 2019

Mergers and Acquisitions (M&As) have been a global phenomenon in corporate world yet there is sti... more Mergers and Acquisitions (M&As) have been a global phenomenon in corporate world yet there is still scope to broaden our current understanding on the subject including the choice of payment. The financing decision also affects an acquirer's ownership structure, financial leverage and subsequent decisions. The choice of investment financing is an important decision in the field of corporate finance. Mergers and acquisitions offer an appropriate framework to study the interaction between investment and financing decisions. Do corporates have systematic preferences for the means of financing investments especially in case of corporate acquisitions? In an acquisition, the acquirer can pay the claims of the target firm shareholders either by paying cash or by issuing stock or by a combination of both cash and stock. The study examines the financing decision involved in 1041 corporate acquisitions undertaken during the period 2000-2017. The study is based on a unique database compiled from SDC Thompson, S&P Capital IQ, Prowess, Capitaline and annual reports. Multinomial logit and nested logit models have been used to examine the factors affecting the acquirer's choice of the financing sources. The study observes that size has an impact on the method of payment in case of cash Payment. A positive relationship is found between relative size and cash payment. As the relative size of the acquisition increases, cash payment becomes more likely and debt financing is preferred. For the characteristics of the acquisition, we find that an increase in tender offers leads to greater payments in cash. The findings also report that there is an increase in cross-border deals for the case of cash and mixed Payment. These empirical results of the nested logit results show that the decisions on the means of payment and on the sources of financing are determined by the different factors. The findings of this study are in line with the pecking order theory and the cost of capital considerations. When the firms have more cash with it than necessary, then there is an increase in cash/transaction value with increase in cash payment over stock payment. Acquirers are also found to use mixed Payment method, when there is a tack of cash with acquirer. The financial variables such as acquirers' cash flow, leverage, Tobin Q are found to not have a very significant impact on the debt Payment. Cash is found to have positively affected by acquirers' cash flow.

IIM Kozhikode Society & Management Review, 2017

The failure of an unparalleled large number of financial institutions during the global financial... more The failure of an unparalleled large number of financial institutions during the global financial crisis of 2007–2008 resulted in a freeze of global credit markets. The financial crisis has affected the capital markets around the world. In contrast, the global financial crisis has facilitated the strategic asset-seeking ambitions of emerging market multinationals. The objective of the present article is to examine the market response to cross-border acquisition by Indian companies during 2003– 2015 by conducting event study. We have also compared the acquisition gains before and after the financial crisis. The acquisition gains for the event window (–1, 1) are 2.06 per cent for the entire period 2003–2015 for a sample of 430 announcements. Two-thirds of the acquisitions experienced positive abnormal returns. The abnormal returns are positive and significant for the entire event window of 41 days. The empirical findings also suggest that the CAAR on the event day for pre-crisis perio...

India Studies in Business and Economics, 2016

Mergers and acquisitions (M&A) have often used as key component of corporate growth strategy. The... more Mergers and acquisitions (M&A) have often used as key component of corporate growth strategy. They have gained momentum, particularly during the last few decades. The growth in the M&A activity has been attributed to number of factors including economic liberalization, both internal and external, volatility in stock markets, deregulation, economies of scale, technological changes, increased role of brand in success of enterprises, etc. (Jenson, 1988; Rhodes-Kropf & Vishwanathan, 2003) M&As form an important part of a strategic plan aimed at some long-term objectives of a company (Scheffman, 1993). They have been used for diversifying businesses, targeting new markets, gaining access to new technologies, capacity building and enhancing competitiveness both in the domestic and international markets, etc. (Yadav & Kumar, 2005). M&A is a general term and it refers to the consolidation of firms. While a merger is a combination of two companies to form a new company, an acquisition is the purchase of one company by another in which no new company is formed. M&A activity may involve large investments and thus require great care and precision in strategic decision-making. M&As have the potential to reduce production costs, increase productivity, enhance product quality, which in turn may offer competitive advantage. M&A may also offer gains in both the operating and the managerial efficiencies (Pautler, 2001). Companies can use M&As as important vehicles for entering new lines of businesses, (Shleifer & Vishny, 1988), in short period of time.

Global Business and Economics Review, 2015

This study analyses 268 cross-border acquisitions of Indian acquirer companies to capture the ret... more This study analyses 268 cross-border acquisitions of Indian acquirer companies to capture the returns to shareholders as a result of the acquisition announcements during the period January 2003 to December 2008 using the event study methodology. We focus on cross border acquisitions, stake-wise acquisitions, considering the target firm both from developed market as well as from emerging market. Acquisitions of targets from developed markets are further analysed among target from USA and from other developed markets. Indian stock market reacts positively to the announcements of cross-border acquisitions. We find that Indian acquirers experience positive and significant abnormal returns of 4% over days (-5, +5) for cross-border acquisitions. We also find that cross-border acquisitions of targets from developed markets outperform acquisitions of targets from emerging markets. The acquirers of full control (control of more than 74% stake) experience a higher gain than the acquirer of majority stake between 51 and 74%.

International Journal of Economics and Finance, 2013

This paper investigates the impact of mergers and acquisitions (M&A) on corporate performance. It... more This paper investigates the impact of mergers and acquisitions (M&A) on corporate performance. It compares performance of the corporates involved in M&A before and after M&A. The results pertaining to operating cash flow ratios show that there is an improvement in performance of the acquiring firms in the post-M&A period. The analysis in terms of Du Pont shows improvement in the long-term operating profit margin of the acquiring firms. This indicates that the acquiring firms earn higher profits per unit net sales after M&A. The higher cash flows are generated primarily due to the better operating margins.

International Journal of Business and Management, 2014

The present paper compares the impact of domestic acquisitions and cross-border acquisitions on I... more The present paper compares the impact of domestic acquisitions and cross-border acquisitions on Indian acquirer shareholders' wealth during 2003-2008. A segregated analysis has also been conducted to measure the impact of stake/control acquired, based on a sample of acquisitions of 268 domestic and 255 target firms across border. Further, this paper also analyses the short-run performance of percentage of stake/control acquired in both type of acquisitions. The stake/control acquired is divided into two categories: (i) complete acquisition and (ii) partial/majority control acquisition. Event study methodology has been conducted to analyse the share price performance of Indian acquirers in short-term. The findings reveal that cross-border as well as domestic acquisitions enhance shareholders' wealth of the acquirer company on the announcement. The results indicate that cross-border acquisitions generate higher returns than domestic acquisitions. Nonetheless, the segregated analysis makes it evident that the shareholders of acquiring firms of complete cross-border acquisitions earn higher abnormal returns (significant at 5 per cent). The abnormal returns are higher (though statistically insignificant) for partial/majority control domestic acquisitions.

IIMB Management Review, 2015

The present chapter delves into ‘how market reacts to the corporate merger deals in India?’. The ... more The present chapter delves into ‘how market reacts to the corporate merger deals in India?’. The present work focuses on mergers concluded through absorptions only. The period of study is from 2003 to 2016. The empirical findings based on 150 cases of mergers in India are analysed. We find that shareholders of Indian acquiring companies adopting mergers through absorption experience negative abnormal returns over event window of 41 days (−20, +20). However, high event-induced variance is also observed in abnormal returns. The present study suggests that such high variances in abnormal returns can be explained by the effects of announcement period of mergers completed through absorption.

India Studies in Business and Economics, 2016

This section of the Developer's Assessment Report (DAR) provides a summary of the main elements o... more This section of the Developer's Assessment Report (DAR) provides a summary of the main elements of the Jay Project (Project) and predictions of the environmental assessment of the Project. For the human environment, the Project is expected to have overall positive effects on the socioeconomic environment, maximizing economic, employment, and educational benefits, while minimizing the negative impacts on well-being, physical infrastructure and non-traditional land use. Impacts to cultural aspects are predicted to be not significant. The Project is expected to have no significant negative effects on the biophysical environment (i.e., air quality, water quality and quantity, fish and fish habitat, vegetation, caribou, and wildlife and wildlife habitat).

India Studies in Business and Economics, 2016

Mergers and Acquisitions are considered to be a very effective method for improving enterprise ma... more Mergers and Acquisitions are considered to be a very effective method for improving enterprise management modes, expanding enterprise scale, and adjusting industrial structure. This method has prevailed in every walk of life all over the world Affected by many factors, enterprise mergers and acquisitions have had a late start in China. The complex and fast-changing environment makes enterprise mergers and acquisitions a substantial risk. In particular, there is serious financial risk filled in every step of the mergers and acquisition process. There are a variety of financial risks involved in mergers and acquisitions, and if these risks are not effectively addressed and controlled, they will cause failure at any time. Therefore, nowadays many scholars and entrepreneurs consider the financial risks of mergers and acquisitions to be the most considerable problem. This paper will propose effective precautionary measures for the financial risks associated with mergers and acquisitions, measures that reduce the impact resulting from financial risks, increase the opportunity of success for mergers and acquisitions, and insure the implementation of enterprise mergers and acquisitions.

India Studies in Business and Economics, 2016

Mergers and acquisitions (MA via resource redeployment, they increase revenues and reduce cost. S... more Mergers and acquisitions (MA via resource redeployment, they increase revenues and reduce cost. Stock market reactions to mergers and acquisitions announcements could help to predict mergers and acquisitions profitability. The present chapter attempts to examine the market response associated with mergers and acquisitions announcements using event study methodology. The effects of these announcements appear to be a good indicator of future success. The empirical research presents evidence that the market, usually, reacts positively to the M&A announcements that are not contaminated by any other contemporaneous firm-specific announcements. The study finds evidence that shareholders of acquiring Indian companies engaging in mergers and acquisitions experience a statistically significant positive abnormal return on announcement day as well as statistically cumulative abnormal returns over multiday event windows. The empirical findings suggest that mergers and acquisitions result in wealth creation for shareholders of the Indian acquirers.

Journal of South Asian Development

The objective of the present paper is to investigate the influence of method of payment employed ... more The objective of the present paper is to investigate the influence of method of payment employed (cash, stock) in financing the acquisition, and to analyze the impact of the type of target firm (listed, unlisted) acquired on acquirers' return in cross-border acquisitions and domestic acquisitions separately. A disaggregate analysis has been conducted to examine the impact on acquirers' return in cross-border acquisitions and domestic acquisitions during the period 2003-08. The results indicate that the acquisitions, financed with cash, generate positive abnormal returns for cross-border acquisitions as well as domestic acquisitions. This could be a signal in favor of `asymmetric information hypothesis and free cash flow hypothesis'. The returns are higher in the case of cross-border acquisitions, however, the difference is statistically significant during event window of two days (-1,0) only. The acquirers of the firms listed cross-border experience average abnormal retu...

In the present paper, we construct a corporate governance index for a sample of 93 Indian compani... more In the present paper, we construct a corporate governance index for a sample of 93 Indian companies listed on Bombay Stock Exchange and National Stock Exchange. The index is based on a comprehensive set of 64 governance attributes for these sample companies, the companies, then, have been classified into four governance portfolios using their corporate governance ranking. Furthermore, we have calculated average of 3 years post - mergers and acquisitions (M&A) financial performance and valuation ratios for each governance portfolio. Our findings suggest good governance appears to be of much value as we found significant higher post mergers and acquisitions rate of return ratios for companies in top quartiles.We also report significant higher valuation ratios for companies in top governance portfolio. The present study concludes that companies with higher rank for corporate governance score are good performers which are revealed from better financial ratios. Their post M&A better fina...

The present study attempts to investigate whether differences in the quality of firm level corpor... more The present study attempts to investigate whether differences in the quality of firm level corporate governance influence short-term performance of acquiring firms for a sample of companies by creating a corporate governance index. The study is based on a survey of sample of 155 companies having completed mergers and acquisitions deals announced during January 2003 to December 2008. We document a positive relationship between corporate governance score and short-term abnormal returns by constructing broad corporate governance Index (CGI) for Indian public listed companies.We use a broad, multi-factor corporate governance score, which is based on the responses to objective survey questions supplemented with interviews of senior management, directors, CFOs, board members, company secretaries, compliance officers, and investor relation officers. The questionnaire is designed on the basis of major standard qualities relevant to measure the corporate governance. The present study conclud...

Flexible Systems Management, 2014

ABSTRACT The present paper is an attempt to explore the influence of method of payment employed i... more ABSTRACT The present paper is an attempt to explore the influence of method of payment employed in financing the acquisitions. The aim of the present paper is to investigate the returns to acquirer shareholders in the case when a combination of cash and stock are used as mode of payment. The study also looks into whether the short-run performance of domestic and cross-border acquisitions is impacted differently when a combination of cash and stock are used as mode of payment. This paper examines the abnormal return to the shareholders of 14 acquiring companies in India during the period 2003-08. The results indicate acquisitions generate statistically significant positive abnormal returns of 5.29 percent during the 5 days event window (-2, 2) when a combination of cash and stock is used as a mode of acquisition. The major finding of disaggregated analysis is that, the acquirer experience higher cumulative average abnormal return (CAAR) in the case of acquisition of domestic target firm. The acquirer earns more than ten percent cumulative average abnormal return (CAAR) during the 5 days event window (-2, 2) when the target firm is domestic. The acquirer earn more than three per cent when during the 5 days event window (-2, 2) when the target firm is cross-border. However, the difference is not statistically significant. The acquisitions financed with a combination of cash and stock experience positive abnormal returns, could be a signal in support of the investment opportunity hypothesis and the risk sharing hypothesis.

Global Journal of Flexible Systems Management, 2012

This paper examines the share price performance of domestic mergers and acquisitions in India dur... more This paper examines the share price performance of domestic mergers and acquisitions in India during the period 2003-2008. The focus of the paper is on the shareholders of acquiring firms. The present work performs a disaggregated analysis for sub-samples based on the status of the target firm acquired. The sample is divided into two categories: (i) acquisition of target firm to be totally absorbed with the acquiring firm (ii) target firm remains as subsidiary (51-100 %). The study further investigates the effect of method of financing (cash or stock) employed in the acquisition and the form of the target firm (listed or unlisted) acquired on the stock returns of the acquiring companies' shareholders. The results indicate that acquisitions generate 1.60 % (statistically significant) cumulative average abnormal returns (CAAR) during the event window of 5 days (-2, ?2) for the entire sample. The major finding of disaggregated analysis is that when target remains as a domestic subsidiary, the acquirer earns 2.82 % CAAR (statistically significant) over pre-event window of 19 days (-20,-2). In contrast, the acquirer shareholder loses 0.41 % CAAR when the target firm is absorbed with the acquiring firm during the same period. The acquisitions financed with cash generate positive abnormal returns. The positive abnormal returns are not observed in the case of acquisitions financed with stock. The acquirer of unlisted domestic target firms experience higher return than the acquirers of listed domestic target firms. However, the acquirers experience (statistically significant) negative abnormal returns for the post-event window of 19 days (?2, ?20) in all acquisitions.

Procedia Economics and Finance, 2013

The present study attempts to investigate whether differences in the quality of firm level corpor... more The present study attempts to investigate whether differences in the quality of firm level corporate governance influence short-term performance of acquiring firms for a sample of companies by creating a corporate governance index. The study is based on a survey of sample of 155 companies having completed mergers and acquisitions deals announced during January 2003 to December 2008. We document a positive relationship between corporate governance score and short-term abnormal returns by constructing broad corporate governance Index (CGI) for Indian public listed companies. We use a broad, multifactor corporate governance score, which is based on the responses to objective survey questions supplemented with interviews of senior management, directors, CFOs, board members, company secretaries, compliance officers, and investor relation officers. The questionnaire is designed on the basis of major standard qualities relevant to measure the corporate governance. The present study concludes that companies with higher rank for corporate governance score have better short-term performance which is revealed from positive and higher abnormal returns during the event windows.

Proceedings of The International Academic Conference on Management and Economics, 2019

Mergers and Acquisitions (M&As) have been a global phenomenon in corporate world yet there is sti... more Mergers and Acquisitions (M&As) have been a global phenomenon in corporate world yet there is still scope to broaden our current understanding on the subject including the choice of payment. The financing decision also affects an acquirer's ownership structure, financial leverage and subsequent decisions. The choice of investment financing is an important decision in the field of corporate finance. Mergers and acquisitions offer an appropriate framework to study the interaction between investment and financing decisions. Do corporates have systematic preferences for the means of financing investments especially in case of corporate acquisitions? In an acquisition, the acquirer can pay the claims of the target firm shareholders either by paying cash or by issuing stock or by a combination of both cash and stock. The study examines the financing decision involved in 1041 corporate acquisitions undertaken during the period 2000-2017. The study is based on a unique database compiled from SDC Thompson, S&P Capital IQ, Prowess, Capitaline and annual reports. Multinomial logit and nested logit models have been used to examine the factors affecting the acquirer's choice of the financing sources. The study observes that size has an impact on the method of payment in case of cash Payment. A positive relationship is found between relative size and cash payment. As the relative size of the acquisition increases, cash payment becomes more likely and debt financing is preferred. For the characteristics of the acquisition, we find that an increase in tender offers leads to greater payments in cash. The findings also report that there is an increase in cross-border deals for the case of cash and mixed Payment. These empirical results of the nested logit results show that the decisions on the means of payment and on the sources of financing are determined by the different factors. The findings of this study are in line with the pecking order theory and the cost of capital considerations. When the firms have more cash with it than necessary, then there is an increase in cash/transaction value with increase in cash payment over stock payment. Acquirers are also found to use mixed Payment method, when there is a tack of cash with acquirer. The financial variables such as acquirers' cash flow, leverage, Tobin Q are found to not have a very significant impact on the debt Payment. Cash is found to have positively affected by acquirers' cash flow.

IIM Kozhikode Society & Management Review, 2017

The failure of an unparalleled large number of financial institutions during the global financial... more The failure of an unparalleled large number of financial institutions during the global financial crisis of 2007–2008 resulted in a freeze of global credit markets. The financial crisis has affected the capital markets around the world. In contrast, the global financial crisis has facilitated the strategic asset-seeking ambitions of emerging market multinationals. The objective of the present article is to examine the market response to cross-border acquisition by Indian companies during 2003– 2015 by conducting event study. We have also compared the acquisition gains before and after the financial crisis. The acquisition gains for the event window (–1, 1) are 2.06 per cent for the entire period 2003–2015 for a sample of 430 announcements. Two-thirds of the acquisitions experienced positive abnormal returns. The abnormal returns are positive and significant for the entire event window of 41 days. The empirical findings also suggest that the CAAR on the event day for pre-crisis perio...

India Studies in Business and Economics, 2016

Mergers and acquisitions (M&A) have often used as key component of corporate growth strategy. The... more Mergers and acquisitions (M&A) have often used as key component of corporate growth strategy. They have gained momentum, particularly during the last few decades. The growth in the M&A activity has been attributed to number of factors including economic liberalization, both internal and external, volatility in stock markets, deregulation, economies of scale, technological changes, increased role of brand in success of enterprises, etc. (Jenson, 1988; Rhodes-Kropf & Vishwanathan, 2003) M&As form an important part of a strategic plan aimed at some long-term objectives of a company (Scheffman, 1993). They have been used for diversifying businesses, targeting new markets, gaining access to new technologies, capacity building and enhancing competitiveness both in the domestic and international markets, etc. (Yadav & Kumar, 2005). M&A is a general term and it refers to the consolidation of firms. While a merger is a combination of two companies to form a new company, an acquisition is the purchase of one company by another in which no new company is formed. M&A activity may involve large investments and thus require great care and precision in strategic decision-making. M&As have the potential to reduce production costs, increase productivity, enhance product quality, which in turn may offer competitive advantage. M&A may also offer gains in both the operating and the managerial efficiencies (Pautler, 2001). Companies can use M&As as important vehicles for entering new lines of businesses, (Shleifer & Vishny, 1988), in short period of time.

Global Business and Economics Review, 2015

This study analyses 268 cross-border acquisitions of Indian acquirer companies to capture the ret... more This study analyses 268 cross-border acquisitions of Indian acquirer companies to capture the returns to shareholders as a result of the acquisition announcements during the period January 2003 to December 2008 using the event study methodology. We focus on cross border acquisitions, stake-wise acquisitions, considering the target firm both from developed market as well as from emerging market. Acquisitions of targets from developed markets are further analysed among target from USA and from other developed markets. Indian stock market reacts positively to the announcements of cross-border acquisitions. We find that Indian acquirers experience positive and significant abnormal returns of 4% over days (-5, +5) for cross-border acquisitions. We also find that cross-border acquisitions of targets from developed markets outperform acquisitions of targets from emerging markets. The acquirers of full control (control of more than 74% stake) experience a higher gain than the acquirer of majority stake between 51 and 74%.

International Journal of Economics and Finance, 2013

This paper investigates the impact of mergers and acquisitions (M&A) on corporate performance. It... more This paper investigates the impact of mergers and acquisitions (M&A) on corporate performance. It compares performance of the corporates involved in M&A before and after M&A. The results pertaining to operating cash flow ratios show that there is an improvement in performance of the acquiring firms in the post-M&A period. The analysis in terms of Du Pont shows improvement in the long-term operating profit margin of the acquiring firms. This indicates that the acquiring firms earn higher profits per unit net sales after M&A. The higher cash flows are generated primarily due to the better operating margins.

International Journal of Business and Management, 2014

The present paper compares the impact of domestic acquisitions and cross-border acquisitions on I... more The present paper compares the impact of domestic acquisitions and cross-border acquisitions on Indian acquirer shareholders' wealth during 2003-2008. A segregated analysis has also been conducted to measure the impact of stake/control acquired, based on a sample of acquisitions of 268 domestic and 255 target firms across border. Further, this paper also analyses the short-run performance of percentage of stake/control acquired in both type of acquisitions. The stake/control acquired is divided into two categories: (i) complete acquisition and (ii) partial/majority control acquisition. Event study methodology has been conducted to analyse the share price performance of Indian acquirers in short-term. The findings reveal that cross-border as well as domestic acquisitions enhance shareholders' wealth of the acquirer company on the announcement. The results indicate that cross-border acquisitions generate higher returns than domestic acquisitions. Nonetheless, the segregated analysis makes it evident that the shareholders of acquiring firms of complete cross-border acquisitions earn higher abnormal returns (significant at 5 per cent). The abnormal returns are higher (though statistically insignificant) for partial/majority control domestic acquisitions.

IIMB Management Review, 2015

The present chapter delves into ‘how market reacts to the corporate merger deals in India?’. The ... more The present chapter delves into ‘how market reacts to the corporate merger deals in India?’. The present work focuses on mergers concluded through absorptions only. The period of study is from 2003 to 2016. The empirical findings based on 150 cases of mergers in India are analysed. We find that shareholders of Indian acquiring companies adopting mergers through absorption experience negative abnormal returns over event window of 41 days (−20, +20). However, high event-induced variance is also observed in abnormal returns. The present study suggests that such high variances in abnormal returns can be explained by the effects of announcement period of mergers completed through absorption.

India Studies in Business and Economics, 2016

This section of the Developer's Assessment Report (DAR) provides a summary of the main elements o... more This section of the Developer's Assessment Report (DAR) provides a summary of the main elements of the Jay Project (Project) and predictions of the environmental assessment of the Project. For the human environment, the Project is expected to have overall positive effects on the socioeconomic environment, maximizing economic, employment, and educational benefits, while minimizing the negative impacts on well-being, physical infrastructure and non-traditional land use. Impacts to cultural aspects are predicted to be not significant. The Project is expected to have no significant negative effects on the biophysical environment (i.e., air quality, water quality and quantity, fish and fish habitat, vegetation, caribou, and wildlife and wildlife habitat).

India Studies in Business and Economics, 2016

Mergers and Acquisitions are considered to be a very effective method for improving enterprise ma... more Mergers and Acquisitions are considered to be a very effective method for improving enterprise management modes, expanding enterprise scale, and adjusting industrial structure. This method has prevailed in every walk of life all over the world Affected by many factors, enterprise mergers and acquisitions have had a late start in China. The complex and fast-changing environment makes enterprise mergers and acquisitions a substantial risk. In particular, there is serious financial risk filled in every step of the mergers and acquisition process. There are a variety of financial risks involved in mergers and acquisitions, and if these risks are not effectively addressed and controlled, they will cause failure at any time. Therefore, nowadays many scholars and entrepreneurs consider the financial risks of mergers and acquisitions to be the most considerable problem. This paper will propose effective precautionary measures for the financial risks associated with mergers and acquisitions, measures that reduce the impact resulting from financial risks, increase the opportunity of success for mergers and acquisitions, and insure the implementation of enterprise mergers and acquisitions.

India Studies in Business and Economics, 2016

Mergers and acquisitions (MA via resource redeployment, they increase revenues and reduce cost. S... more Mergers and acquisitions (MA via resource redeployment, they increase revenues and reduce cost. Stock market reactions to mergers and acquisitions announcements could help to predict mergers and acquisitions profitability. The present chapter attempts to examine the market response associated with mergers and acquisitions announcements using event study methodology. The effects of these announcements appear to be a good indicator of future success. The empirical research presents evidence that the market, usually, reacts positively to the M&A announcements that are not contaminated by any other contemporaneous firm-specific announcements. The study finds evidence that shareholders of acquiring Indian companies engaging in mergers and acquisitions experience a statistically significant positive abnormal return on announcement day as well as statistically cumulative abnormal returns over multiday event windows. The empirical findings suggest that mergers and acquisitions result in wealth creation for shareholders of the Indian acquirers.

Journal of South Asian Development

The objective of the present paper is to investigate the influence of method of payment employed ... more The objective of the present paper is to investigate the influence of method of payment employed (cash, stock) in financing the acquisition, and to analyze the impact of the type of target firm (listed, unlisted) acquired on acquirers' return in cross-border acquisitions and domestic acquisitions separately. A disaggregate analysis has been conducted to examine the impact on acquirers' return in cross-border acquisitions and domestic acquisitions during the period 2003-08. The results indicate that the acquisitions, financed with cash, generate positive abnormal returns for cross-border acquisitions as well as domestic acquisitions. This could be a signal in favor of `asymmetric information hypothesis and free cash flow hypothesis'. The returns are higher in the case of cross-border acquisitions, however, the difference is statistically significant during event window of two days (-1,0) only. The acquirers of the firms listed cross-border experience average abnormal retu...

In the present paper, we construct a corporate governance index for a sample of 93 Indian compani... more In the present paper, we construct a corporate governance index for a sample of 93 Indian companies listed on Bombay Stock Exchange and National Stock Exchange. The index is based on a comprehensive set of 64 governance attributes for these sample companies, the companies, then, have been classified into four governance portfolios using their corporate governance ranking. Furthermore, we have calculated average of 3 years post - mergers and acquisitions (M&A) financial performance and valuation ratios for each governance portfolio. Our findings suggest good governance appears to be of much value as we found significant higher post mergers and acquisitions rate of return ratios for companies in top quartiles.We also report significant higher valuation ratios for companies in top governance portfolio. The present study concludes that companies with higher rank for corporate governance score are good performers which are revealed from better financial ratios. Their post M&A better fina...

The present study attempts to investigate whether differences in the quality of firm level corpor... more The present study attempts to investigate whether differences in the quality of firm level corporate governance influence short-term performance of acquiring firms for a sample of companies by creating a corporate governance index. The study is based on a survey of sample of 155 companies having completed mergers and acquisitions deals announced during January 2003 to December 2008. We document a positive relationship between corporate governance score and short-term abnormal returns by constructing broad corporate governance Index (CGI) for Indian public listed companies.We use a broad, multi-factor corporate governance score, which is based on the responses to objective survey questions supplemented with interviews of senior management, directors, CFOs, board members, company secretaries, compliance officers, and investor relation officers. The questionnaire is designed on the basis of major standard qualities relevant to measure the corporate governance. The present study conclud...

Flexible Systems Management, 2014

ABSTRACT The present paper is an attempt to explore the influence of method of payment employed i... more ABSTRACT The present paper is an attempt to explore the influence of method of payment employed in financing the acquisitions. The aim of the present paper is to investigate the returns to acquirer shareholders in the case when a combination of cash and stock are used as mode of payment. The study also looks into whether the short-run performance of domestic and cross-border acquisitions is impacted differently when a combination of cash and stock are used as mode of payment. This paper examines the abnormal return to the shareholders of 14 acquiring companies in India during the period 2003-08. The results indicate acquisitions generate statistically significant positive abnormal returns of 5.29 percent during the 5 days event window (-2, 2) when a combination of cash and stock is used as a mode of acquisition. The major finding of disaggregated analysis is that, the acquirer experience higher cumulative average abnormal return (CAAR) in the case of acquisition of domestic target firm. The acquirer earns more than ten percent cumulative average abnormal return (CAAR) during the 5 days event window (-2, 2) when the target firm is domestic. The acquirer earn more than three per cent when during the 5 days event window (-2, 2) when the target firm is cross-border. However, the difference is not statistically significant. The acquisitions financed with a combination of cash and stock experience positive abnormal returns, could be a signal in support of the investment opportunity hypothesis and the risk sharing hypothesis.

Global Journal of Flexible Systems Management, 2012

This paper examines the share price performance of domestic mergers and acquisitions in India dur... more This paper examines the share price performance of domestic mergers and acquisitions in India during the period 2003-2008. The focus of the paper is on the shareholders of acquiring firms. The present work performs a disaggregated analysis for sub-samples based on the status of the target firm acquired. The sample is divided into two categories: (i) acquisition of target firm to be totally absorbed with the acquiring firm (ii) target firm remains as subsidiary (51-100 %). The study further investigates the effect of method of financing (cash or stock) employed in the acquisition and the form of the target firm (listed or unlisted) acquired on the stock returns of the acquiring companies' shareholders. The results indicate that acquisitions generate 1.60 % (statistically significant) cumulative average abnormal returns (CAAR) during the event window of 5 days (-2, ?2) for the entire sample. The major finding of disaggregated analysis is that when target remains as a domestic subsidiary, the acquirer earns 2.82 % CAAR (statistically significant) over pre-event window of 19 days (-20,-2). In contrast, the acquirer shareholder loses 0.41 % CAAR when the target firm is absorbed with the acquiring firm during the same period. The acquisitions financed with cash generate positive abnormal returns. The positive abnormal returns are not observed in the case of acquisitions financed with stock. The acquirer of unlisted domestic target firms experience higher return than the acquirers of listed domestic target firms. However, the acquirers experience (statistically significant) negative abnormal returns for the post-event window of 19 days (?2, ?20) in all acquisitions.

Procedia Economics and Finance, 2013

The present study attempts to investigate whether differences in the quality of firm level corpor... more The present study attempts to investigate whether differences in the quality of firm level corporate governance influence short-term performance of acquiring firms for a sample of companies by creating a corporate governance index. The study is based on a survey of sample of 155 companies having completed mergers and acquisitions deals announced during January 2003 to December 2008. We document a positive relationship between corporate governance score and short-term abnormal returns by constructing broad corporate governance Index (CGI) for Indian public listed companies. We use a broad, multifactor corporate governance score, which is based on the responses to objective survey questions supplemented with interviews of senior management, directors, CFOs, board members, company secretaries, compliance officers, and investor relation officers. The questionnaire is designed on the basis of major standard qualities relevant to measure the corporate governance. The present study concludes that companies with higher rank for corporate governance score have better short-term performance which is revealed from positive and higher abnormal returns during the event windows.