An Empirical Study on Abnormal Return Around Buyback Announcements by Indian Firms

Abstract

This paper examines the market response surrounding the share buyback announcements of large capitalised Indian companies from years 2010 to 2016 covering 73 firms. T-test was carried out to identify the abnormal return in the range before and after 10 days from share buyback announcements. The result shows a significant positive abnormal return during that period. The finding is supported with information asymmetric, which shows that stock market reacts more favourably through the repurchase announcements by large firms. This study is consistent with the signalling hypothesis that shows share repurchase announcement can be an effective tool generating abnormal return to the shareholders in the stock market in India.

Keywords: Buyback, Event study, Shareholders value

JEL Classification: G14, G32, G34