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In mergers, the results of gains to the shareholders of the acquiring firms are inconclusive. The objective of this study are to reexamine the motives of the acquiring to engage in mergers and if the economic condition of a country affects the levels of gains and losses. We examined the cumulative abnormal returns of mergers taken place during the years of 1998-1999 and 2000-2002. For the first period, post mergers gains were significantly negative and the second sample, the gains were positive and significant. We also compared the abnormal returns for the two periods and found the difference to be statistically significant. These results indicte that merger in boom conditions create higher gains for shareholders of acquiring firms compared to mergers occuring in during recession.

Finance, Mergers