Mergers Effects on Financial Performance: A Difference-in-Difference based Event Study in Automobile Sector

Abstract

The merger success is driven more by long-term integration and operational synergy than immediate financial performance. This study investigates whether mergers in the Indian automobile sector generate measurable financial benefits, using a combination of Difference-in-Differences (DID), Event Study analysis, correlation assessment, and trend comparison between merged and non-merged firms. The study uses only two merged firms (Bharat Forge and Nissan Motors merged in 2016) and compared with six non-merged firms. This small "treated" group may limit the generalizability of the findings.  The DID results show that the merger had no statistically significant causal impact on key performance indicators such as Net Profit, ROAA, ROAE, and EPS. Event-study estimates reinforce this finding, revealing no consistent or sustained post-merger performance effects, aside from a temporary ROE decline in the 4^th pre-merger year, and then it rises. Correlation analysis indicates strong interdependence among profitability indicators (NP, ROAA, ROAE) and moderate connection with EPS. Trend analysis reveals that while merged firms do not experience notable causal gains, they demonstrate greater financial stability and lower volatility, particularly during market disruptions such as the COVID-19 period, compared to non-merged firms. Overall, the evidence suggests that mergers in the automobile industry provide strategic stability rather than measurable short-term profitability improvements.