Wealth Effect of Mergers & Acquisitions in an Emerging Market: A Case Study of Pakistan’s Banking Sector

14 Pages Posted: 6 Aug 2010  

Sana Fatima Tauseef

Institute of Business Administration (IBA), Karachi

Nishat Mohammed

University of Auckland

Date Written: August 5, 2010

Abstract

This study investigates the short term market response associated with the announcement of seven mergers and acquisitions (M&As) in the banking sector of Pakistan during the period 2003 to 2008 using the event study methodology. We categorize the sample M&A deals as (1) Acquisition of Pakistani banks by the foreign investors, (2) Merger of Pakistani banks with the other domestic banks and (3) Merger of Pakistani banks with the foreign banks operating in Pakistan. The results indicate statistically significant investor reactions around the merger announcements. For individual target and bidder banks, the cumulative abnormal returns (CARs) range from significant positive to significant negative. The combined mean CARs for the target banks group and bidder group are both positive and statistically significant. The mean CAR for the combined banks in the domestic mergers is also positive but is largely impacted by the substantial positive CAR of one bidder bank.

Keywords: Merger & Acquisition, Wealth effect, emerging market, banking

JEL Classification: G34, G38, E21, G21, F40

Suggested Citation

Tauseef, Sana Fatima and Mohammed, Nishat, Wealth Effect of Mergers & Acquisitions in an Emerging Market: A Case Study of Pakistan’s Banking Sector (August 5, 2010). Available at SSRN: https://ssrn.com/abstract=1653690 or http://dx.doi.org/10.2139/ssrn.1653690

Sana Fatima Tauseef (Contact Author)

Institute of Business Administration (IBA), Karachi ( email )

University Road
Karachi, Sindh 75270
Pakistan

Nishat Mohammed

University of Auckland ( email )

Private Bag 92019
Com. A, room: 108
Auckland
New Zealand
64-9-373-7599 extn: 7594 (Phone)

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