Open repurchase announcements and abnormal returns of Indian firms: An industry-wise analysis


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Although the tender offer buyback method has gained significance over time, many companies still prefer open market repurchases. The existing literature focuses mainly on the impact of buyback announcements, specifically on stock returns; however, buyback announcements and abnormal returns in the case of open market repurchases have not yet been studied in detail, especially across industries in the Indian context. This study, therefore, attempts to analyze the impact of open market repurchase announcements on the stock returns of Indian firms. To that end, the event study methodology has been used for a period of 31 days, i.e. 15 days prior to and 15 days after the buyback announcement on a filtered sample of 100 firms during the period 2010–2020. The results of the study indicate that the returns were more favorable in the short run. The findings do not support the undervaluation rationale of firms behind the open buyback statement. The low-profit opportunities in the prior event window convey investors’ predictions about the repurchase announcement. In the context of industries, the manufacturing sector seemed to be far better than IT & telecom, chemical, and pharma firms as the returns were statistically significant for five (5) out of 31 days. The industry-specific results also suggest that the profit opportunities are majorly in the pre-announcement phase. The overall findings corroborate that share repurchases might be irrelevant to shareholders’ wealth. Therefore, open market buybacks may support decisions related to capital structure changes.

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

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    • Figure 1. Average Abnormal Returns (AAR) for the event window of –15 to +15
    • Figure 2. Cumulative Average Abnormal Returns (CAAR) for the event window of –15 to +15
    • Figure 3. Average Abnormal Returns (AAR) for IT and Telecom Sector
    • Figure 4. Average Abnormal Returns (AAR) of the Chemical and Pharma Sector
    • Figure 5. Average Abnormal Returns (AAR) of the Manufacturing Sector
    • Figure 6. Average Abnormal Returns (AAR) of other firms
    • Figure 7. Average Abnormal Returns (AAR) of the Service Sector
    • Table 1. Selected industries and number of firms
    • Table 2. AAR and CAAR values of all firms
    • Table 3. CAAR for different event windows for shorter duration
    • Table 4. AAR and T-STAT values for different industries
    • Table 5. Number of open market offers, tender offers and IPOs
    • Conceptualization
      Vandana Bhama
    • Data curation
      Vandana Bhama
    • Formal Analysis
      Vandana Bhama
    • Methodology
      Vandana Bhama
    • Software
      Vandana Bhama
    • Validation
      Vandana Bhama
    • Visualization
      Vandana Bhama
    • Writing – original draft
      Vandana Bhama