Shareholders’ Wealth Effects of Mergers and Acquisitions on Acquiring Firms in the Indian IT and ITeS Sector

The paper evaluates the shareholders wealth effect of Merger and Acquisition (M&A) announcements on acquiring firms in the Indian Information Technology and Information Technology enabled Services (IT and ITeS) sector. It covers domestic deals announced between 1999 to 2000 in this sector. Event study methodology was used to estimate abnormal returns assuming semi-strong form of market efficiency. Using single factor and multiple factor market model to estimate abnormal returns, the results were tested using a combination of parametric and nonparametric tests. Both the models indicate that the acquiring firms made significant wealth gains in case of acquisition announcements whereas merger announcements generated losses to them. The standardized parametric tests give robust results as compared to non standardized tests. Also, the findings using parametric tests are supported by nonparametric tests as well. The paper also adds to the existing literature on the form of efficiency of the capital market in India.