Increase in Expected Returns on the Investment

Abstract

Although the main purpose of the enterprises is to increase their profitability, they actually want to increase the service and service quality they provide in order to reach their profit targets. For this purpose, companies aim to grow and increase their potential customer base through a horizontal and vertical merger strategy. The perception in the market, especially for public companies, is that the mergers and acquisitions will increase the stock price. Is there a significant difference between stock returns in real terms before and after purchase, or is it merely a market perception? Or are investors able to generate higher returns in the market after news of mergers and acquisitions? When the effective markets hypothesis mentions information efficiency, it means that it is not possible to obtain a return above the market since all information in the market will be reflected on the stock price. In order to find the answer to these questions, it has been analyzed whether the stock returns of the bank shares, which are selected from Turkey, developed and developing countries’ have abnormal return and cumulative abnormal return before and after the merger and acquisition.