Authors: Dr. Sunil Kumar
Abstract: A firm may undertake its business expansion through internal or external restructurings. The external restructuring includes, mergers, acquisitions, spin-off, and join-venture etc. Mergers and Acquisitions (M&A) are the most attractive and strategic business decisions which may influence stock-prices too. In India, every listed company is required to submit information in advance regarding such strategic actions to respective stock-exchanges under Regulations 30, of the SEBI, called corporate acquisition announcements (CA). Around the CA time, stock-price tends to change due to impact of such strategic actions. In the present study, event-study methodology is applied. The day on which CA is made is taken as D=0, and estimation window is considered from -83 to -7 days. Day 0 to +7 is taken as event window for which prediction of intercept and slope for Ri, Rm, Rf, SLM, and HMB is computed. For the purpose this study, four models, viz., market model, market model with Scholes-Williams Beta Estimation, CAPM and FF3F Models are applied. The results of first three models are not helpful in explaining model significantly and address impact of Rm and Rf on Ri. Whereas, FF3F model accounts size and value factors to investigate the impact of CA on ExRi and AbRi. CAPM establishes positive impact of CA on AbRi on two days in post-CA period, but there is negative impact of CA on AbRi during event-window under FF3F model.
