B.P. Bijay Sankar, N.M.Leepsa
Indian Journal of Research in Capital Markets, April - June 18
Publication year: 2018

The study examined the short-term stock performance of the acquirers due to the announcement of different payment methods in mergers and acquisitions (M&A) deals. The investigation explored if is there any significant changes in the abnormal returns (AR) of acquiring companies as they choose different payment methods. Event study methodology was used to investigate the acquirers’ AR due to the announcement of three types of payment methods i.e. cash, stock, and mixed in M&A deals during the period of 1st April 2000 to 31st March 2017. The analysis were carried out by taking 197 cash deals, 138 stock deals and 39 mixed payment methods deals which were announced by Indian acquiring companies from the non-financial sector. The abnormal returns calculated for a period of 61 days surrounding the event announcement day applying the market model. The parametric test (t-statistic, patell Z test) and a non-parametric test (sign test) used to check the robustness of the results. Findings indicated that the payment method uses in M&A deals is a vital factor in explaining the stock returns during the announcement period. The results specified that the acquirer from the non-financial sector gains positively higher ARs in the pre-announcement period for cash and mixed payment methods deals than stock payment method. The result also showed that the stock payment method deals generate negative returns in various event window periods across the announcement day. The information gained from this study will help the investors to generate more short-term profit from Indian stock market.

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