Abstract
This research work examines stock price reaction to Mergers & Acquisitions announcements to identify the post and pre-facto effect of M&A announcements on the stock prices of the bidding or acquiring firms. The investigation has been conducted using the traditional event study methodology. The Cumulative Average Abnormal Returns (CAAR) of the bidding firm's stock prices in different event windows have been analysed. paired sample analysis is done by comparing the pre and post-announcement returns as well as pre and post effective day returns of the acquiring firms’ stock prices in the event window of 3, 5, 10 and 15days. Across all the event windows, bidding firm's stock price yields positive CAAR that is significantly different from zero. It was found that the post announcement returns are significantly greater than the pre-announcement returns and post effective day returns are higher than pre effective day returns, indicative of the immediate market response to the information disclosure.
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