Announcement Effects of Share Buyback: Study of IT Companies Listed on NSE

Abstract

This paper examines the reaction of market share prices on announcement of share buyback, as a tool of restructuring of shares and the regulation of buyback practices in India. Companies announce buyback of shares either to increase the value of issued shares or to eliminate any fear by shareholders who may be looking for a controlling stake. The effect of announcement of buyback is always revealed on share prices. The Information Technology companies are chosen for study which is listed on the National Stock Exchange of India. The provisions regulating buyback of shares are enclosed in Section 77A, 77AA and 77B of the Companies Act, 1956. These sections were inserted by the Companies Amendment Act, 1999. The paper reveals the previews of the buyback of shares by IT companies and its impact on financial performance of the company.

Keywords: buyback, capital restructuring, Securities and Exchange Board of India (SEBI), tender offer, shareholding