Announcement effect of tender offer share buyback around turmoil period – evidence from India
-
Received April 21, 2024;Accepted July 4, 2024;Published August 5, 2024
-
Author(s)Link to ORCID Index: https://orcid.org/0000-0001-8459-2055
,
Link to ORCID Index: https://orcid.org/0000-0001-9313-9754,
Link to ORCID Index: https://orcid.org/0000-0002-8701-6720,
Link to ORCID Index: https://orcid.org/0000-0002-3770-8956,
Link to ORCID Index: https://orcid.org/0000-0002-2221-3133 -
DOIhttp://dx.doi.org/10.21511/imfi.21(3).2024.14
-
Article InfoVolume 21 2024, Issue #3, pp. 160-169
- TO CITE АНОТАЦІЯ
- 41 Views
-
4 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
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.
- Keywords
-
JEL Classification (Paper profile tab)G14, G12 and G30
-
References23
-
Tables5
-
Figures0
-
- 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
-
- Ahluwalia, J., & Mahendru, M. (2019). TCS Share Buyback. South Asian Journal of Business and Management Cases, 8(1), 58-69.
- Albaity, M., & Said, D. S. (2016). Impact of Open-Market Share Repurchases on Long-Term Stock Returns: Evidence From the Malaysian Market. SAGE Open, 6(4).
- Arora, R. K. (2022). Why Do Indian Companies Repurchase Their Shares? Global Business Review, 23(1), 205-217.
- Chatterjee, C., & Dutta, P. (2015). Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India. Vikalpa, 40(4), 435-443.
- Chatterjee, C., & Mukherjee, P. (2015). Price Behaviour around Share Buyback in the Indian Equity Market. Global Business Review, 16(3), 425-438.
- Gupta, M. (2017). Share Buyback and Announcement Effects: An Industry Wise Analysis. FIIB Business Review, 6(2), 43-50.
- Gupta, V. (2018). Open Market Repurchases and Signaling Hypothesis. Theoretical Economics Letters, 08(03), 592-608.
- Grullon, G., & Michaely, R. (2004). The information content of share repurchase programs. The Journal of Finance, 59(2), 651-680.
- Hung, J. H., & Chen, Y. P. (2010). Equity undervaluation and signaling power of share repurchases with legal restrictions. Emerging Markets Finance and Trade, 46(2), 101-115.
- Kim, J. (2007). Buyback trading of open market share repurchase firms and the return volatility decline. International Journal of Managerial Finance, 3(4), 316-337.
- Kim, K. S., & Park, Y. W. (2021). Long-term performance following share repurchase, signaling costs and accounting transparency: Korean evidence. Review of Accounting and Finance, 20(2), 143-166.
- Lin, L.-H., Chiu, Y.-, & Liu, A. (2011). Stock Repurchase Announcements and Stock Prices Evidence From Taiwan. The International Journal of Business and Finance Research, 5(1), 1-12.
- Mishra, A. K. (2005). An empirical analysis of share buybacks in India. The ICFAI Journal of Applied Finance, 25.
- Nguyen, T. T., Sutton, N. K., & Pham, D. (2015). The post-repurchase announcement drift: an anomaly in disguise? Managerial Finance, 41(2), 205-224.
- Pandey, A., Bhama, V., & Mohapatra, A. K. (2020). Trading strategy using share buybacks: Evidence from India. Investment Management and Financial Innovations, 17(2), 169-182.
- Pettit, J. (2001). Is a share buyback right for your company? Harvard Business Review, 79(4), 141-147.
- Seal, J. K., & Matharu, J. S. (2018). Long-term performance of buybacks in India. Global Business Review, 19(6), 1554-1566.
- Segara, R., & Yang, J. Y. (2022). Firm, institutional and short sellers’ trading behavior around share repurchases. Managerial Finance, 48(2), 201-221.
- Steenkamp, G., & Wesson, N. (2020). Post-recession share repurchase behaviour by JSE-listed companies: transparent or not? Journal of Accounting in Emerging Economies, 10(3), 465-486.
- Vermaelen, T. (1984). Repurchase Tender Offers, Signaling, and Managerial Incentives. The Journal of Financial and Quantitative Analysis, 19(2), 163-181.
- Wrońska-Bukalska, E., & Kaźmierska-Jóźwiak, B. (2017). Signaling hypotheses of share repurchase – Life cycle approach. The case of Polish listed companies. Equilibrium. Quarterly Journal of Economics and Economic Policy, 12(2), 245-257.
- Yarram, S. R. (2014). Factors influencing on-market share repurchase decisions in Australia. Studies in Economics and Finance, 31(3), 255-271.
- Yook, K. C., & Gangopadhyay, P. (2014). The wealth effects of accelerated stock repurchases. Managerial Finance, 40(5), 434-453.
-
-
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
-
Conceptualization
-
The impact of foreign ownership on corporate governance: evidence from an emerging market
Investment Management and Financial Innovations Volume 16, 2019 Issue #2 pp. 101-115 Views: 1964 Downloads: 292 TO CITE АНОТАЦІЯThis research explores the influence of foreign ownership on non-financial public shareholding firms in the Amman Stock Exchange (ASE). The study involved an investigation into the connection between non-Jordanian ownership and the company growth opportunity, stock liquidity, leverage, dividend policy and business output. The results highlight that foreign ownership can provide improved corporate governance practices by playing a decisive role in increasing the growth opportunity and enhancing the firms’ market valuation, as measured by Tobin’s Q. Moreover, the findings indicate that companies with foreign board membership have better operating performance and higher firm value. The rewards were reaped by foreign investors based on their superior monitoring ability, which affects the decisions made and actions taken by management.
-
Fund performance-flow relationship and the role of institutional reform
Investment Management and Financial Innovations Volume 15, 2018 Issue #1 pp. 311-327 Views: 1915 Downloads: 221 TO CITE АНОТАЦІЯExtant literature shows the positive impact of institutional development on investor rationality and market efficiency. The authors extend this evidence by investigating the performance-flow relationship in the Chinese mutual fund market before and after the enforcement of the revised Law of the People’s Republic of China on Securities Investment Fund. Empirical evidence reveals that Chinese investors irrationally chase past star performers before institutional reform, but gradually become rational and less obsessed with star-chasing behaviors after reform. Moving one percentile upward in the relative performance among the star funds is associated with money inflows by 0.532% after reform, much lower than 1.433% before reform. The findings confirm the positive influence of institutional development on investor rationality and market efficiency. The successful experience can be borrowed by other emerging markets with less developed institutions.
-
New market reforms and stock exchange liquidity: the case of Kuwait
Investment Management and Financial Innovations Volume 16, 2019 Issue #1 pp. 46-64 Views: 1808 Downloads: 176 TO CITE АНОТАЦІЯIn developing markets, new regulations are imposed to protect investors, to assure fairness and to enhance trust through controlling all types of market abuse. In addition, these regulations are imposed to enhance the overall market performance and efficiency. Market liquidity is one of the main pillars used to measure market overall performance. In this paper, the authors attempt to analyze market liquidity before and after the passage of the Capital Market Authority Law of 2010 (CMA), aimed at enhancing investors’ confidence and reinforcing better disclosure quality and accountability for Kuwait public companies. By introducing six liquidity measures that captures market depth, turnover, and volatility, the authors documented highly significant deterioration in all the measures following the CMA Law with more profound effect on smaller firms. The researchers concluded that overstated regulations in developing markets, in spite of its goal of improving market overall performance, structure, enhancing investors’ protection, and market integrity, can have an adverse effect on market efficiency.