Impact of Buyback Announcements on Stock Market in India

Abstract

Buyback of shares was considered as a good beginning for introducing flexibility in the capital structure. In 1999, the Securities and Exchange Board of India issued guidelines on buyback of shares that are to be followed by the listed companies. Buybacks can be regarded as the late 20th century adoptive strategy in the ever-changing, challenging and demanding scenario of modern corporate finance. The companies going for buyback may have their own reason(s). But the interesting factor to look at is how the stock market reacts to such share repurchase programs. Objectives of the study are to study impact of buyback announcements on stock market in India and provide findings/ results based on analysis. In view of the objectives of the study, exploratory research design has been adopted. Information have been collected for the study on announcement of buyback of shares of companies listed in the S&P CNX 500 broad-based index from 2008-2014.Ten observations of closing market prices of shares before and after the event of buyback of shares have been considered. NSE and money control websites are the sources from which number of companies and their respective dates of announcements based on the board meetings have been identified. The statistical tools applied for data analysis is descriptive and inferential statistic like paired comparison ‘t’test .is used for the analysis of hypotheses. It is concluded that buyback of shares has no impact on stock market.