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    LOKESH CHAUDHARY
    The document reviews several studies that have examined the impact of mergers and acquisitions. Some key findings include: 1) Studies have found both positive and negative impacts of M&A announcements on shareholder wealth in acquiring and target banks in India. 2) Cross-border M&As in manufacturing have been found to lead to employment downsizing, while effects are weaker for non-manufacturing. 3) Motives for M&As in the Indian banking sector include creating larger banks to compete at a global scale and improving performance, though synergies are not guaranteed.

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    Paper 1

    Uploaded by

    LOKESH CHAUDHARY
    41 views2 pages
    The document reviews several studies that have examined the impact of mergers and acquisitions. Some key findings include: 1) Studies have found both positive and negative impacts of M&A announcements on shareholder wealth in acquiring and target banks in India. 2) Cross-border M&As in manufacturing have been found to lead to employment downsizing, while effects are weaker for non-manufacturing. 3) Motives for M&As in the Indian banking sector include creating larger banks to compete at a global scale and improving performance, though synergies are not guaranteed.

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    merger and aquisition in indian banking system

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    paper 1

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    The document reviews several studies that have examined the impact of mergers and acquisitions. Some key findings include: 1) Studies have found both positive and negative impacts of M&A announcements on shareholder wealth in acquiring and target banks in India. 2) Cross-border M&As in manufacturing have been found to lead to employment downsizing, while effects are weaker for non-manufacturing. 3) Motives for M&As in the Indian banking sector include creating larger banks to compete at a global scale and improving performance, though synergies are not guaranteed.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    41 views2 pages

    Paper 1

    Uploaded by

    LOKESH CHAUDHARY
    The document reviews several studies that have examined the impact of mergers and acquisitions. Some key findings include: 1) Studies have found both positive and negative impacts of M&A announcements on shareholder wealth in acquiring and target banks in India. 2) Cross-border M&As in manufacturing have been found to lead to employment downsizing, while effects are weaker for non-manufacturing. 3) Motives for M&As in the Indian banking sector include creating larger banks to compete at a global scale and improving performance, though synergies are not guaranteed.

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    of 2

    LITERATURE REVIEW

    According to DEVARAJAPPA S. in 2012 says that Several studies have been conducted to
    examine the impact of mergers and Acquisition. Berger
    and Humphery (1997) in their study provide on extensive review on the efficiency of baking
    sector. They pointed out that majority of studies focused on the banking markets of well
    developed countries with particular emphasis on US market.
    Anand Manoj & Singh Jagandeep (2008) studied the impact of merger announcements of five
    banks in the Indian Banking Sector on the share holder bank. These mergers were the Times
    Bank merged with the HDFC Bank, the Bank of Madurai with the ICICI Bank, the ICICI Ltd
    with the ICICI Bank, the Global Trust Bank merged with the Oriental Bank of commerce and the
    Bank of Punjab merged with the centurion Bank. The announcement of merger of Bank had
    positive and significant impact on share holders wealth. The effect on both the acquiring and the
    target banks, the result showed that the agreement with the European and the US Banks Merger
    and Acquisitions except for the facts the value of share holder of bidder Banks have been
    destroyed in the US context, the market value of weighted Capital Adequacy Ratio of the
    combined Bank portfolio as a result of merger announcement is 4.29% in a three day period (-1,
    1) window and 9.71 % in a Eleven days period (-5, 5) event window. The event study is used for
    proving the positive impact of merger on the bidder Banks.
    Lehto Eero & Bockerman Petri(2008) evaluated the employment effects of Merger and
    Acquisitions on target by using match establishment level data from Finland over the period of
    1989-2003. They focused cross border Merger and Acquisitions as well as domestic Merger and
    Acquisitions and analyzed the effect of employment of several different types of Merger and
    Acquisitions. They evaluated that the cross border Merger and Acquisitions lead to downsizing
    the manufacturing employment and the effects of cross border Merger and Acquisitions on
    employment in non- manufacturing are much weaker and change in ownership associated with
    domestic Merger and Acquisitions and internally restructuring also typically causes employment
    losses. To look the effects of cross border Merger and Acquisitions (M&As) Hijzen Alexander et
    al., (2008) studied the impact of cross border Merger and Acquisitions (M&As) and analyzed the
    role of trade cost, and explained the increased in the number of cross border Merger and
    Acquisitions (M&As) and used industry data of 23 countries over a period of 1990 -2001. The
    result suggested that aggregate trade cost affects cross border merger activity negatively, its
    impact differ importantly across horizontal and non-horizontal mergers. They also indicated that
    the less negative effects on horizontal merger, which is consistent with the tariff jumping
    agreement, put forward in literature on the determinant of horizontal FDI.
    Mantravadi Pramod & Reddy A Vidyadhar (2007) evaluated that the impact of merger on the
    operating performance of acquiring firms in different industries by using pre and post financial
    ratio to examine the effect of merger on firms. They selected all mergers involved in public
    limited and traded companies in India between 1991 and 2003, result suggested that there were
    little variation in terms of impact as operating performance after mergers. In different industries
    in India particularly banking and finance industry had a slightly positive impact of profitability
    on pharmaceutical, textiles and electrical equipments sector and showed the marginal negative
    impact on operative performance. Some of the industries had a significant decline both in terms
    of profitability and return on investment and assets after merger.
    Coming down on the various motives for Merger and Acquisitions, Mehta Jay & Kakani Ram
    Kumar (2006) stated that there were multiple reasons for Merger and Acquisitions in the Indian
    Banking Sector and still contains to capture the interest of a research and it simply because of
    after the strict control regulations had led to a wave of merger and Acquisitions in the Banking
    industry and states many reason for merger in the Indian Banking sector. While a fragmented
    Indian banking structure may be very well beneficial to the customer because of competition in
    banks, but at the same time not to the level of global Banking Industry, and concluded that
    merger and Acquisition is an imperative for the state to create few large Banks.
    Mslmov Alvsat (2002) examined that synergy is one of the main factor behind the merger
    and took 56 mergers from US industry, and the cash flows improvement in the productive usage
    of assets and increasing the sales and showed the surviving firm improvement in operating cash
    flows. The post merger create additional value and shows the improvement of bidder firm with
    price to book ratio, used non-parametric test as most suitable method of testing post merger
    performance.
    R. Srivassan et al., (2009) gave the views on financial implications and problem occurring in
    Merger and Acquisitions (M&As) highlighted the cases for consolidation and discussed the
    synergy based merger which emphasized that merger is for making large size of the firm but no
    guarantee to maximize profitability on a sustained business and there is always the risk of
    improving performance after merger.
    Sinha Pankaj & Gupta Sushant (2011) studied a pre and post analysis of firms and concluded that
    it had positive effect as their profitability, in most of the cases deteriorated liquidity. After the
    period of few years of Merger and Acquisitions(M&As) it came to the point that companies may
    have been able to leverage the synergies arising out of the merger and Acquisition that have not
    been able to manage their liquidity. Study showed the comparison of pre and post analysis of the
    firms. It also indicated the positive effects on the basis of some financial parameter like Earnings
    before Interest and Tax (EBIT), Return on shareholder funds, Profit margin, Interest Coverage,
    Current Ratio and Cost Efficiency etc.
    Aharon David Y et al., (2010), analyzed the stock market bubble effect on Merger and
    Acquisitions and followed by the reduction of pre bubble and subsequent, the bursting of bubble
    seems to have led to further consciousness by the investors and provide evidence which suggests
    that during the euphoric bubble period investor take more risk. Merger of banks through
    consolidation is the significant force of change took place in the Indian Banking sector.
    Kuriakose Sony et al., (2009), focused on the valuation practices and adequacy of swap ratio
    fixed in voluntary amalgamation in the Indian Banking Sector and used swap ratio for valuation
    of banks, but in most of the cases the final swap ratio is not justified to their financials.

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