IMPACT OF MERGER ON FIRM PERFORMANCE AND SHAREHOLDER WEALTH: A STUDY OF ICICI BANK & BANK OF RAJASTHAN
Keywords:
Merger & Acquisition, Event Study, Financial Performance, Ratio AnalysisAbstract
The merger of Bank of Rajasthan with ICICI Bank is the seventh voluntary merger under section 44 A of the Banking Regulation Act 1949. This is the 4th acquisition in the series of acquisition by ICICI Bank- the largest private sector and second largest bank in India. This research paper analyses the impact of merger on the firm performance and shareholder wealth. Performance was measured in three perspectives viz. profitability, operational efficiency and business performance. Pre and post-merger comparison of financial performance of the bank was made, using financial ratio analysis approach, to determine whether the merger had leaded the bank to profitable situation or not. 14 financial ratios for 10 years were analysed. Event study has been conducted to gauge the stock market response to merger announcement. An event window of -7 to +7 and an estimation window of 180 days prior to the day of -7 have been used. The result of analysis shows that the performance of the bank has improved significantly in the post-merger period. The result of event study shows that the shareholders of BOR have gained more than that of ICICI shareholders.
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