Measuring Impact of HDFC Groups' Strategic Merger: An Event Study

It was announced on April 4, 2022 that HDFC Ltd. and HDFC Bank will be merging into a single entity. The initiative received acceptance of the Reserve Bank of India. A research was conducted to investigate how the news of the merger impacted the stock price of HDFC Bank. The merger of HDFC Bank and HDFC Ltd. signified a significant step forward for the banking and financial industry in India. The purpose of this research is to investigate the effect that the amalgamation created on the stock prices of both companies. The sample for this study is sixty days after the announcement of the merger. The announcement day is the date of the merger. The researcher also looked at whether or not the news of the merger had a favorable impact on the day of the event, as well as in the time leading up to and post the event. For the purpose of analyzing the data spanning 11 days, Event Study, and more specifically the OLS Market Model, was used. The investigation concluded that the declaration of the merger was the sole reason for unusual return on the day of the event. According to the findings of the research, HDFC bank shareholders saw abnormal profits before to the event, but they did not experience any gains during the crisis. According to the findings of the study performed, HDFC Bank investors obtained an amazing return when the announcement of the merger with HDFC Ltd. was made. According to the article, the merger resulted in an increase in the stock values of both HDFC Bank and HDFC Ltd. The aberrant returns that HDFC Ltd. experienced on the day of the occurrence and the day after it occurred were statistically significant. There was a statistically significant difference between the atypical returns of HDFC Bank on the day of the occurrence and two days following it. Both companies saw positive and statistically significant abnormal returns on their investments. When the news of the merger was made, the market responded positively, which indicated that investors believed both companies would gain from the combination. Investors and regulators in the banking and financial industries really need to have this report.