"Do acquisitions create value for the acquiring firm's shareholders?" This is an unresolved question in the literature of acquisitions. This study analyzes the value creation of acquirers in India on an acquisition announcement and the sensitivity of the stock markets during an acquisition announcement. Most of the literature in the West concludes that, on an acquisition announcement, only the targets create value, and the acquirers are value destructive. This study uses a sample of 78 acquirers in the manufacturing industry who acquired targets in the calendar year 2012. The study develops four hypotheses and uses the event study methodology (market model/ ordinary least square model). The results of the study suggest that acquisitions are neither value creative to Indian acquirers and those acquirers with prior acquisition experience create more value than single acquirers. Surprisingly, the results show that acquirers using cash generate negative returns, which may be due to the presence of the hubris effect. Another important finding of the study is that the acquirers using stock as a method of payment are no longer value destructive, which is contrary to the literature which states that acquirers using cash are value creative and acquirers using stock are value destructive. This is an important contribution to the existing literature of the method of payment, and it implies that the theories in the West may not necessarily hold well in India, and they need to be reassessed before being implemented in the Indian context.

1. Barnes, P. (2000). The identification of U.K. takeover targets using published historical cost accounting data: Some empirical evidence comparing logit with linear discrimination analysis and raw financial ratios with industry-relative ratios. International Review of Financial Analysis, 9(2), 147-162. DOI : <a href=http://dx.doi.org/10.1016/S1057-5219(00)00022-3 target="_blank">http://dx.doi.org/10.1016/S1057-5219(00)00022-3</a>
2. Bhagat, S., Malhotra, S., & Zhu, P. C. (2011). Emerging country cross-border acquisition: Characteristics, acquirer returns and cross-sectional determinants. Emerging Markets Review, 12(3), 250-271. DOI: <a href=http://dx.doi.org/10.1016/j.ememar.2011.04.001 target="_blank">http://dx.doi.org/10.1016/j.ememar.2011.04.001</a>
3. Brown, S. J. (1985). Using daily stock returns: The case of event studies. Journal of Financial Economics, 14 (1), 3-31. DOI :<a href=http://dx.doi.org/10.1016/0304-405X(85)90042-X target="_blank">http://dx.doi.org/10.1016/0304-405X(85)90042-X</a>
4. Capron, L., & Pistre, N. (2002). When do acquirers earn abnormal returns? Strategic Management Journal, 23 (9), 781-794. DOI: 10.1002/smj.262.
5. Chakarbarti, R. (May 2008). Do Indian acquisitions add value? ICRA Money and Finance Bulletin, May 2008, 61-73, Retrieved from <a href=http://www.icra.in/Files/MoneyFinance/IndianAcquisitions.pdf target="_blank">http://www.icra.in/Files/MoneyFinance/IndianAcquisitions.pdf</a>
6. Chari, A., Ouimet, P. P., & Tesar, L. L. (2004). Cross-border mergers and acquisitions in emerging markets: The stock market valuation of corporate control. EFA Maastricht Meetings, Paper No. 3479. DOI: <a href=http://papers.ssrn.com/sol3/papers.cfm?abstract_id=608542 target="_blank">http://papers.ssrn.com/sol3/papers.cfm?abstract_id=608542</a>
7. Chatterji, R., & Kuenzi, A. (2001). Mergers & acquisitions: The influence of methods of payment on bidder's share price. WP 6/2001. The Judge Institute of Management Studies, University of Cambridge, Cambridge.
8. CMIE Prowess. (2012). Database. Center for Monitoring Indian Economy Pvt. Ltd.
9. Fuller, K., Netter, J., & Stegemoller, M. (2002). What do returns to acquiring firms tell us? Evidence from firms that make many acquisitions. The Journal of Finance, 57 (4), 1763-1793. DOI: 10.1111/1540-6261.00477
10. Holland, K. M., & Hodkinson, L. (1994). The pre-announcement share price behavior of UK takeover targets. Journal of Business Finance & Accounting, 21(4), 467-490. DOI: 10.1111/j.1468-5957.1994.tb00331.x
11. Kale, P. (2004). Acquisition value creation in emerging markets: An empirical study of acquisitions in India. Academy of Management Proceedings, 2004 (1), H1- H6.
12. Padmavathy, S., & Ashok, J. (2012). Merger announcements and stock price behaviour: Empirical evidence from Indian stock market. International Research Journal of Finance and Economics, Issue 83, 153-160.
13. Palepu, K. G. (1986). Predicting takeover targets: A methodological and empirical analysis. Journal of Accounting and Economics, 8 (1), 3-35. DOI: <a href=http://dx.doi.org/10.1016/0165-4101(86)90008-X target="_blank">http://dx.doi.org/10.1016/0165-4101(86)90008-X</a>
14. Roll, R. (1986). The hubris hypothesis of corporate takeovers. Journal of Business, 59 (2), 197-216.
15. Wansley, J. W., Lane, W. R., & Yang, H. C. (1983). Abnormal returns to acquired firms by type of acquisition and method of payment. Financial Management, 12 (3), 17-22.