Announcement effect of tender offer share buyback around turmoil period – evidence from India

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The announcement of a buyback informs the market about the company’s decision to repurchase its own shares. This announcement highlights the company’s price valuation and the inefficiencies that exist in the market. This study examines the share buyback announcement effect during the COVID-19 period. The study considered the stocks listed in the National Stock Exchange (NSE) that offered share buyback under tender offer mode during the pre-pandemic period between April 2016 and February 2020 and the post-pandemic period between March 2020 and March 2022. 75 firms in the pre-pandemic period and 43 in the post-pandemic period that announced share buyback under the tender offer method were analyzed. The event study methodology using a market model was employed to determine the presence of abnormal returns during the event period, which consisted of –21 days and +21 days. The findings of the study revealed the existence of abnormal returns in and around the announcement date. Besides, statistically significant cumulative abnormal average returns (CAAR) were also found on the event day, i.e., on Day 0. The study found that the impact of buyback announcements on stock returns significantly differed before and after COVID-19 for 10 and 21-day periods, with no significant differences for shorter periods. These insights can help traders and fund managers make informed portfolio adjustments during turbulent market periods surrounding buyback announcements.

Acknowledgement
The authors express their sincere gratitude and special thanks to Dr. Krishna T.A., Assistant Professor, Department of Professional Studies, School of Commerce, Finance and Accountancy, CHRIST (Deemed to be University), Bangalore, India, for encouraging, motivating and providing all the required support throughout this empirical investigation and to accomplish this research task.

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    • Table 1. CAAR and BHAR for pre-COVID-19 period
    • Table 2. Pre-and-post event day CAAR and BHAR
    • Table 3. CAAR and BHAR for post-COVID-19 period
    • Table 4. Pre- and post-event day CAAR and BHAR
    • Table 5. Paired t-test results for pre- and post-COVID-19 period Average Abnormal Returns
    • Conceptualization
      Suresha B., Kavitha Desai, Rejoice Thomas
    • Data curation
      Suresha B., Kavitha Desai, Rejoice Thomas, Nijumon K John, Elizabeth Renju Koshy
    • Formal Analysis
      Suresha B., Nijumon K John, Elizabeth Renju Koshy
    • Funding acquisition
      Suresha B.
    • Investigation
      Suresha B.
    • Methodology
      Suresha B., Rejoice Thomas, Nijumon K John, Elizabeth Renju Koshy
    • Project administration
      Suresha B., Kavitha Desai, Rejoice Thomas
    • Resources
      Suresha B., Kavitha Desai, Nijumon K John, Elizabeth Renju Koshy
    • Supervision
      Suresha B., Kavitha Desai, Nijumon K John, Elizabeth Renju Koshy
    • Validation
      Suresha B., Kavitha Desai, Rejoice Thomas, Nijumon K John, Elizabeth Renju Koshy
    • Writing – original draft
      Suresha B., Kavitha Desai
    • Visualization
      Rejoice Thomas, Elizabeth Renju Koshy
    • Writing – review & editing
      Rejoice Thomas, Nijumon K John, Elizabeth Renju Koshy