Title: Impact of buy-back: empirical study on Indian markets

Authors: Arun Kumar Gopalaswamy

Addresses: Department of Management Studies, IIT Madras, Chennai – 600036, India

Abstract: This study empirically investigates the behaviour of share prices around share buy-back announcements by Indian firms using a standard event methodology. It was observed that there was a significant market reaction to the buy-back announcements during the announcement period viz. the announcement date and the day prior to it. The market reaction t persists on the first day after the announcement of buy-backs regardless of the buy-back mechanisms adopted by the firms. The analysis suggests that the share prices which recorded a rapid decline prior to the buy-back announcement remained almost constant for a few days immediately following the announcement and then declined again, but at a much slower pace. A pattern similar to that of the post announcement period was also observed after the occurrence of actual buy-back. This study also examines the firms' choice of repurchase mechanism, and the link between those choices and the share price reaction.

Keywords: India; share buy-backs; repurchase; share prices; market reaction.

DOI: 10.1504/IJBEM.2013.054940

International Journal of Business and Emerging Markets, 2013 Vol.5 No.3, pp.268 - 282

Received: 22 Jun 2012
Accepted: 31 Dec 2012
Published online: 13 Nov 2013 *

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