Motivations for Buyback Among Indian Companies

XI Capital Markets Conference, 21-22 December 2012, Indian Institute of Capital Markets (UTIICM)

21 Pages Posted: 3 May 2013

See all articles by Ashish Arora

Ashish Arora

Guru Nanak Dev University (GNDU)

Jasmeet Pasricha

Punjab University

Date Written: April 23, 2013

Abstract

Buyback strategy is increasingly adopted by Indian firms since its introduction in 1999. Since its introduction, more than 250 announcements have been made by firms to provide necessary support for their undervalued stocks. The motivations behind buyback decision are necessary to be understood to have complete understanding of corporate usage of buyback. The present study is first ever attempt for Indian capital markets whereby the possible motivations affecting buyback decision have been identified and represented using suitable variables. Ultimate analysis of possible motivations has been performed by developing a multiple regression analysis model with proportion of shares bought to total outstanding shares as dependent variable. A final sample of 135 buyback announcements covering a period of 1999-2011 has been taken under consideration for regression analysis. With undervaluation hypothesis emerging as the most dominant determinant, followed by availability of free cash, buyback of shares has emerged as a significant financial decision to provide short term support to share prices along with a wonderful tool to utilise excess cash to achieve desired financial results.

Suggested Citation

Arora, Ashish and Pasricha, Jasmeet, Motivations for Buyback Among Indian Companies (April 23, 2013). XI Capital Markets Conference, 21-22 December 2012, Indian Institute of Capital Markets (UTIICM) . Available at SSRN: https://ssrn.com/abstract=2255385 or http://dx.doi.org/10.2139/ssrn.2255385

Ashish Arora (Contact Author)

Guru Nanak Dev University (GNDU) ( email )

GT ROAD Amritsar
GT, ROAD AMRITSAR
Amritsar, Punjab 143005
India

Jasmeet Pasricha

Punjab University ( email )

Patiala
India

Register to save articles to
your library

Register

Paper statistics

Downloads
118
Abstract Views
734
rank
234,583
PlumX Metrics