To examine the existence of financial synergies in related merger. The study examines changes in systematic risk, residual risk, total risk, leverage ratio, and earnings volatilities due to merger activities in both related mergers and conglomerate mergers in order to compare and investigate the existence of financial synergy. The study also examines these variables as explanatory variables with the market reaction during merger announcement period (total return as a dependent variable) to capture the shareholder wealth effect by changes in our explanatory variables that represent financial synergy. The sample covers all quoted acquisitions over a 20 years period using a sample of 791 companies. The results are inconsistent with the literature that supports only conglomerate mergers that can achieve financial synergy. Even though the study finds significant changes in the variables that represent financial synergy in related mergers, but market does react significantly positively to only unsystematic risk reduction. The results provide an empirical evidence to assert that conglomerate merger is not the only type of merger that can achieve financial synergy.