Title: Do cross border acquisitions increase shareholder's wealth? The case of Indian pharmaceutical firms
Authors: Abdul Wajid; Harjit Singh
Addresses: Amity College of Commerce and Finance (ACCF), Amity University, Noida, India ' Amity School of Business (ASB), Amity University, Noida, India
Abstract: Indian pharmaceutical firms have been on an acquisition spree and witnessed around 216 cross border acquisition deals worth more than $11,350 million during January 2005 to March 2019.1 The primary motive of this study is to analyse the impact of cross border acquisition (CBA) announcements on the short-run abnormal returns to Indian acquirers in the pharmaceutical sector. This study applied event study methodology and analysed 55 CBAs that happened in 24 foreign markets by 27 Indian pharmaceutical firms, from the year 2005 to 2018. Both parametric and non-parametric tests were applied to examine the robustness of abnormal returns. It was found that the announcements of foreign acquisitions by Indian pharmaceutical firms have created wealth gains for the shareholders. Further, there is strong evidence that Indian pharmaceutical firms experience significant positive abnormal returns surrounding the acquisition announcements of target firms in the developed markets and in contrast experienced insignificant negative abnormal returns when the acquired target firms were based in developing markets.
Keywords: Indian pharmaceutical firms; cross border acquisitions; CBAs; foreign acquisitions; mergers and acquisitions; M&As; abnormal returns; shareholder's wealth; event study methodology; short term gains.
International Journal of Business Excellence, 2022 Vol.27 No.3, pp.387 - 409
Received: 20 Oct 2019
Accepted: 16 Jan 2020
Published online: 28 Jul 2022 *