Average Anormal Return of the Acquiring Companies

The final results to average abnormal returns are reflected through the figures
presented below:
Days AAR t-statistics Days AAR t-statistics
-20 -5.00556 -1.3451614 1 0.26118 0.07018779
-19 -4.74865 -1.2761202 2 0.50377 0.13537973
-18 -4.49638 -1.2083268 3 0.750639 0.20172173
-17 -4.24427 -1.1405777 4 0.99845 0.26831668
-16 -3.9921 -1.0728096 5 1.252918 0.33670074
-15 -3.75257 -1.0084402 6 1.497305 0.40237574
-14 -3.49995 -0.940552 7 1.754175 0.47140519
-13 -3.25548 -0.874855 8 2.000134 0.53750259
-12 -2.99839 -0.8057662 9 2.247682 0.60402695
-11 -2.7446 -0.7375646 10 2.500299 0.67191342
-10 -2.50091 -0.6720781 11 2.755938 0.74061232
-9 -2.25671 -0.606453 12 3.005012 0.80754664
-8 -2.00315 -0.5383117 13 3.251048 0.87366468
-7 -1.75192 -0.4707981 14 3.491801 0.93836308
-6 -1.49485 -0.4017158 15 3.752594 1.00844691
-5 -1.25296 -0.3367108 16 3.997448 1.07424722
-4 -0.99698 -0.2679205 17 4.259795 1.14474863
-3 -0.75508 -0.2029156 18 4.497337 1.20858415
-2 -0.49679 -0.1335035 19 4.743182 1.27465064
-1 -0.25688 -0.0690332 20 5.004622 1.34490851
0 0.012467 0.00335033

It is to be noted that during the 41 days window period, the abnormal returns for
the public bank companies have proved to be fruitful with respect to increase in
the returns of the banking companies. The results of the event study shows that
prior to announcement day, the abnormal returns were recorded in negative
figures and during post announcement day the abnormal returns are in the
positive figures. If we can observe during pre -announcement period the returns
were in negative which shows that the bank was not performing well due to
various reasons such as lack of technology, increase in the market competition .
The abnormal returns above also demonstrates that after the announcement of
merger of the bank it has positively affected the returns which means after
merger the bank it will able to perform better which will beneficial to the
company as well as its stakeholders able to generate enough revenue to its
shareholders but after the merger they will be in position to perform well.
Analysis of Cumulative Abnormal Returns
To get the importance of the perfect period for the investment opportunities,
the analysis of the cumulative abnormal returns has been made over various
windows period and presented through figures in 1.1

Table:1.1 Cumulative Abnormal return of Acquiring Bank across various event

window
Company 1 day window 2 day window 5 day window 20 day
window
CAR CAR CAR CAR
Punjab -0.028331 -0.000973 0.1427768 -0.097399
National
Bank

State Bank of 0.1817607 0.2872508 0.568096 1.221154

India

Canara Bank 0.078935956 0.136265266 0.133580043 0.133403115

Union Bank
of India 0.012277969 0.007053299 0.041285713 -0.381923875

Bank of
Baroda 0.01529 0.07209 0.07854 0.13189

Indian Bank 0.0150628 -0.023269 -0.171179 -0.303867

From the above table it can be seen that the results of Punjab National Bank in
terms of the cumulative abnormal return have been remained negative and
insignificant for all window except (-5,+5) days window. A very impressive
picture has been seen in case of State Bank of India in which the positive values
for cumulative abnormal return were calculated 0.1817607, 0.2872508,
0.568096, 1.221154 for the window period (-1,+1),(-2,+2),(-5,+5),(-20,+20)
which shows that the SBI stocks are performing well and it will be beneficial
for investors who wish to invest in the SBI stocks.. The results of Canara Bank
and Bank of Baroda for cumulative abnormal return have been positive and
consistent during the window period of (-2,+2),(-5+5),(-20,+20)and (-2,+2),(-
5,+5) respectively which shows that the stock of both the companies have been
doing well in the different window period. The CAR have been consistently
growing which gives the investor and manager of the company to make
optimum utilisation of the available resources .The cumulative abnormal returns
of Union Bank of India also found to be positive for the window period of three
days(-1,+1),five days (-2,+2),eleven days(-5,+5). In case of Indian Bank
cumulative abnormal return have been negative for window period of (-2,+2),(-
5+5),(-20,+20) which states that merger announcement have negatively effected
the Indian banks.
.Conclusion
The purpose of this paper was to examine the impact of merger and acquisition
of public sector bank over the period from 2012 to 2022 by using event study
methodology. Under this method we took different window period of
(1,+1)(2,+2),(-5+5),(-20,+20) to find out the stock returns of the Acquiring bank
. The average abnormal return have shown positive significant results after the
announcement date of merger and acquisition which indicates that the
announcement has positively affected the public banks. The cumulative
abnormal returns of State Bank of India have been positive and consistently
increasing which indicates that target banks which are merging with SBI will
have an advantage of all resources in terms of technology, services, products,
larger customers base, economic of scale. SBI is one of the largest public sector
bank in India.
The CAR of Canara Bank ,Bank of Baroda and Union Bank of India have
shown that the effect of announcement have shown positive significant results
for the target bank who have merged with these banks will have access to all the
resources especially for weak banks who is not able to perform well financially.
Bank of Baroda is the second largest public sector bank in India after SBI.
The results of cumulative abnormal returns for Punjab National Bank and
Indian Bank have been negative which indicates that there have been negative
impact on these two bank after the announcement of merger and acquisition. As
after the announcement the return of these two banks started to decline in the
window period of (1,+1)(2,+2)(-20,+20) and (2,+2),(-5+5),(-20,+20)
respectively.