Does Share Repurchase Announcement Lead to Rise in Share Price? Evidence from India

2019 ◽  
Vol 20 (2) ◽  
pp. 420-433
Author(s):  
Paramita Mukherjee ◽  
Chanchal Chatterjee
Keyword(s):  
Stock Returns ◽  
Market Share ◽  
Share Price ◽  
Share Repurchase ◽  
Open Market ◽  
Individual Basis ◽  
Increasing Trend ◽  
Excess Stock Returns ◽  
Repurchase Announcements

In recent years, there is an increasing trend of share repurchase announcement by Indian firms. This article attempts to examine whether open market share repurchase announcements in India lead to excess stock returns and to identify the factors responsible for additional stock returns. Apart from a standard market method, the price behaviour is examined on an individual basis. The results show that the firms, on an average, do not experience price improvement after share repurchase. While 24 per cent of the firms lose and 10 per cent gain, the rest experience no change. In normal times, investors prefer small-cap companies, but post-announcement, promoters’ share and premium play an important role.

The Credibility of Open Market Share Repurchase Signaling

2012 ◽  
Vol 47 (5) ◽  
pp. 1059-1088 ◽  
Author(s):  
Ilona Babenko ◽  
Yuri Tserlukevich ◽  
Alexander Vedrashko
Keyword(s):  
Stock Returns ◽  
Market Share ◽  
Firm Value ◽  
Share Repurchase ◽  
Open Market ◽  
Announcement Returns ◽  
Repurchase Announcements

AbstractOpen market share repurchase announcements are commonly associated with equity undervaluation, but their signal about firm value can often be misleading. We conjecture that executives who buy shares of their firm before an announcement add credibility to the undervaluation signal. Consistent with this hypothesis, we find that announcement returns are positively related to past insider purchases, especially for firms that are priced less efficiently. Firms whose insiders bought more shares are also more likely to complete their repurchase plans. Finally, we find that insider purchases predict post-announcement stock returns.

Insider Trading and Firm Performance Following Open Market Share Repurchase Announcements

2014 ◽  
Vol 41 (1-2) ◽  
pp. 156-184 ◽  
Author(s):  
Hsuan-Chi Chen ◽  
Sheng-Syan Chen ◽  
Chia-Wei Huang ◽  
John D. Schatzberg
Keyword(s):  
Firm Performance ◽  
Market Share ◽  
Insider Trading ◽  
Share Repurchase ◽  
Open Market ◽  
Repurchase Announcements

scholarly journals Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India

2015 ◽  
Vol 40 (4) ◽  
pp. 435-443 ◽  
Author(s):  
Chanchal Chatterjee ◽  
Paromita Dutta
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Market Model ◽  
Share Repurchase ◽  
Open Market ◽  
Announcement Date ◽  
Event Date ◽  
Abnormal Stock Returns ◽  
Repurchase Announcements ◽  
The Impact

Executive SummaryThis article examines the impact of open market share repurchase announcements on stock returns in the Bombay Stock Exchange (BSE). The main objective is to examine whether share repurchase announcements under the open market route have any significant impact on the returns of the stocks traded in the BSE. The article covers the period from 2009 to 2013. For sample selection, two criteria were used: first, the firm should have been listed in the BSE for at least 28 trading days before the repurchase announcement date, and second, the firm should have all relevant data required by this study. A total of 95 repurchase announcements fulfilled these criteria. The analysis period extended from –28 to +28 trading days relative to the repurchase announcement date ( t = 0). The findings of the study will help us to understand how the market responds to share repurchase announcements in India and whether a firm actually benefits by repurchasing its own shares from the market.This study uses a standard event methodology based on an ordinary least squares market model with the aim of finding out whether repurchase announcements generate any abnormal return around the repurchase announcement date. While applying the market model for estimating the abnormal returns, the regression is estimated based on the stock return of the firm and market return of the previous 120 trading days. So, here the estimation window takes into account 120 observations. Using this, the expected returns are generated and then the abnormal returns are derived for the event window, 28 days prior to the event date and 28 days after the event date.The findings of the study indicate that share repurchase announcements do not necessarily generate abnormal stock returns in the Indian equity market unlike developed economies like the US, Canada, and Australia. The whole sample is further divided into various subsamples on the basis of firm size and size of repurchase. The subsample analyses reveal that smaller firms do not necessarily experience higher abnormal stock returns following repurchase announcements than that of the larger firms. The findings weakly support the view that larger repurchase size generates greater abnormal stock returns than the smaller ones.

scholarly journals Testing the Information-Based Trading Hypothesis in the Option Market: Evidence from Share Repurchases

2019 ◽  
Vol 12 (4) ◽  
pp. 179 ◽  
Author(s):  
Badshah ◽  
Koerniadi ◽  
Kolari
Keyword(s):  
Stock Returns ◽  
Market Share ◽  
Private Information ◽  
Stock Prices ◽  
Implied Volatility ◽  
Share Repurchases ◽  
Share Repurchase ◽  
Open Market ◽  
Option Prices ◽  
Abnormal Stock Returns

The informed options trading hypothesis posits that option prices lead stock prices. In this paper, we extended the research on this hypothesis to open-market share repurchases. Empirical tests showed that the implied volatility spread was not significantly related to buy-and-hold abnormal stock returns. However, further evidence reveal a significant relationship between implied volatility spread and subsequent stock return volatility around open-market share repurchase events. We concluded that option traders have private information on the volatility of stock returns and superior information processing ability that accounts for prescient pricing behavior in options relative to stocks.

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