Vandana Bhama

Corporates express their intention to reward shareholders during repurchase announcements by maximizing their wealth. However, most empirical research finds that stocks’ performance is poor when repurchase announcements are made, and there are no significant abnormal returns. In the Indian context, the present study examines firms’ real intention behind repurchase decisions. The sample comprises 132 firms listed on the Bombay Stock Exchange (BSE) from 2012 to 2018. A Tobit regression model has been used on different firm set-up. The empirical results reveal that low stock valuation is the prominent reason for buybacks among corporates. Firms prefer repurchases to provide abnormal returns to the investors; however, the Indian market does not react much positively to the repurchases, and this might be the reason for less encouraging buybacks in the Indian market. Further, the tender offer is the most preferred mode to open market repurchases. In the case of service firms, undervaluation, low earnings, and low debt ratios are the contributing factors impacting repurchases. Firms with low dividend intend to have more buybacks to reduce their tax burden.

Acknowledgment
The infrastructural support provided by FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.

The efficient market hypothesis states that in the efficient markets, participants cannot make extra-normal returns by exploiting any publicly available information. However, traders are constantly looking to exploit publicly available information to generate abnormal returns for themselves and their clients. One such event is share buyback announcement, which traders can utilize to create profitable trading strategies. The authors undertake the present study to examine if share buyback announcements provide profitable trading strategies to traders. Event study methodology has been adopted to analyze buyback announcements by Indian companies from January 2012 to December 2018. Forty-one (41) day window period comprising of 20 days pre-event, an announcement day, and 20 days post-event period is created to analyze the risk-adjusted average abnormal returns. The empirical findings suggest that there are negligible trading opportunities available for investors post announcements. However, significant risk-adjusted returns are found in the pre-event window, indicating that if investors can predict buyback announcements, they may earn extra-normal returns. The study confirms that Indian stock markets are in the semi-strong form of efficiency. The study also provides a profitable trading strategy for investors in the pre-event window. Finally, it also draws the regulators’ attention to see if insider trading could be the reason for abnormal returns in the pre-event window. The authors conclude the results by confirming that Indian markets are semi-strong in market efficiency and by indicating regulatory interventions to control insider trading.

Acknowledgement
The infrastructural support provided by FORE School of Management, New Delhi in completing this paper is gratefully acknowledged.