Does a parent-subsidiary merger enhance efficiency in Korea

The purpose of this research is to analyze the motivations for mergers and the disclosure effects before and after two parties, which have a parent and subsidiary relationship, submit a merger agreement. The results of analysis show that the main aims of a merger between the two parties are to enhance the efficiency and the competitive power of the companies and to diversify their business lines. Efficiency increment plays an important role in a merger. A merged corporation has realized positive abnormal returns before and after a merger. Business diversification has brought the highest cumulative average abnormal returns due to the disclosure effects.