What is it about?
The purpose of this paper is to study whether mergers and acquisitions (M&As) create value in Indian and Chinese markets. The authors study abnormal returns (AR) created by the acquiring firms in Indian and Chinese markets relating to M&A announcements, using the following three different statisticalmethods: i.e. mean, market and ordinary least squares adjusted return models.
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Why is it important?
China and India are the largest and fastest- growing economies in which multibillion dollar investments are made every year in M&A. M&A is playing an integral role in the growth and development of these economies and are expected to continue increasing to catch up with the developed economies (Liu et al., 2009). Arguably, Chinese and Indian Governments and firms should carefully weigh the benefits of M&A to reduce risks. Results from the current study will provide local indigenous knowledge and further strengthen the existing literature about M&A that will help China, India and other developing economies.
Perspectives
Surprisingly, our results show no improvement in Chinese firms’ value after M&A during the study period. This could be that ChineseM&A are usually used to increase growth and resources, rather than to increase shareholder value. Whereas, Indian M&As show no improvement for Indian companies after M&A for the study period due to family-owned listed companies in the Indian market. That can distort the aim of M&A, as family-owned companies tend only to concentrate on their own benefits rather than about their shareholders’ or investors’ benefits.
Dr Krishna Reddy
Toi Ohomai Institute of Technology
Read the Original
This page is a summary of: Do mergers and acquisitions create value?, Studies in Economics and Finance, June 2019, Emerald,
DOI: 10.1108/sef-01-2018-0027.
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