Does Corporate Information Impact the Sentiments of Investors and Corporate Growth? Evidence from the M&A event on the Cement Industry in India.

Abstract

Sustainable corporate growth is a vital goal in today’s competitive business environment, especially in sectors like cement manufacturing, where strong domestic and international competitors drive market forces. To expand strategically and improve operational efficiency, companies increasingly turn to mergers and acquisitions (M&As) as an inorganic way to generate synergies, lessen market competition, gain technical expertise, and better utilise resources. This study aims to assess how M&A transactions influence both investor sentiment and the financial growth of acquiring firms within the Indian cement industry. Using a dual approach comprising financial ratio analysis (Current Ratio, Liquid Ratio, Net Profit Ratio, Gross Profit Ratio, RoNW, RoCE, EPS, DPS, Debt-Equity Ratio, and Interest Coverage Ratio) and an event study method, this research investigates a selection of cement companies listed on Indian stock exchanges, chosen based on market capitalisation. Secondary data were gathered from reliable sources, including the National Stock Exchange (NSE), Money Control, Yahoo Finance, and published annual reports. The event study employs an estimation window of 250 trading days, from 281 to 31 days before the M&A announcement, along with an event window of ±30 days around the announcement date to capture stock market reactions. The statistical significance of abnormal returns (AR) is tested using t-values at a 95% confidence level. Operational efficiency is measured with ratio analysis considering 5 years (two years pre-merger, the year of merger, and two years post-merger). Results show that most of the AR are positive in all the companies under study, and the AR of Ambuja post-merger is statistically significantly positive (AR > 1.96), and the same is the case for ACC cement. Though the ARs of Dalmia Bharat and Jay Prakash are not statistically significant, but positive. Additionally, ratio analysis shows that the liquidity, profitability, and solvency position of all the companies under study are found to have been improved post-merger as compared to pre-merger. The authors concluded that investors are more sensitive to the mergers and acquisitions event, and M&A creates value for the shareholders and for the company as well. Beyond empirical evidence, this study contributes to accounting theory by demonstrating how corporate disclosures in M&A events influence investor sentiment, supporting signaling theory, and extending the understanding of how market responses are shaped by accounting information. These insights enrich theoretical debates on the role of disclosure in shareholder value creation.