Stock price reaction to merger and acquisition announcement: evidence from Colombo stock market

Abstract

This study examines, Stock Price Reaction to Merger and Acquisition Announcement in the Sri Lankan context for the period of 2009 to 2014. It was analysed using 26 offeror companies and 40 offeree companies listed on the Colombo Stock Exchange. To examine the reaction of share prices to the announcement of Merger and Acquisition the standard event study was done. In addition, it was also examined using accounting study that is financial ratios of two years before the announcement date and two years after the announcement date were analysed. Analysis shows that the announcements of merger and acquisition have a negative impact on the firm performance from the offeree side and there is a positive impact on the firm performance from the offeror side.