SAMVAD: International Journal of Management

Open Access Open Access  Restricted Access Subscription Access

Short Term Effects of Stock Prices as a Result of the Share Buyback Process of Indian it Companies Observed on National Stock Exchange of India During the Years 2013 to 2018


Affiliations
1 Symbiosis Institute of Business Management, Symbiosis International (Deemed) University, Pune - 412115, Maharashtra, India
2 Investment Banking, HSBC, Salarpuria Softzone, Bellandur, Bengaluru, India
3 Positive Moves Consulting, Golf Course Road, DLF Phase 5, Sector 43, Gurugram, Haryana, India
 

Share buybacks refer to the repurchasing of shares of stock by the company that issued them. There can be several reasons for a company to go for share buyback:

• To utilise unused cash

• To preserve the share price

• To take benefit of undervalued share

In this study, we examine the effects on the share price as a result of share buyback. It is important to understand the reasons behind undertaking this study. While share buybacks have been chosen by a few companies in the recent past - this becomes a helpful tool to understand performance and motivation for stock market trades placed on stock exchanges in the country. This study could help predict possible price movement of stocks prior to a possible share buyback officially announced by the company. As the companies being discussed are large-cap and stable companies; analysts predict the possibility of a share buyback as a possible alternative well in advance before such an activity actually happens with the company. Hence understanding the possible impact, if any of short term effects of stock prices due to share buyback process on Indian stocks listed on the stock exchanges become important; thereby validating the need for this study.

The target sector and companies selected for this study are Indian IT companies which have undergone buyback in the period 2013 to 2018. This research aims at analysing the past five-year data of top 5 IT companies in India and listed on the National Stock Exchange, i.e., Infosys, HCL Technologies, Wipro, TCS, Tech Mahindra and determine the short term effects of share buyback. Due to excess cash reserves, share buyback has been a common phenomenon in Indian IT companies recently. We shall be taking into account changes in share prices after the buyback announcement. Our analysis will include studying the effects on factors like price volatility, excess returns and value created for the companies, after share buyback.


Keywords

Impact on Stock Prices, Indian IT Companies Stock Prices, Share Buyback.
User
Notifications
Font Size

  • Bhargava, S. & Agrawal, P. (2015). Announcement effect of share buyback on share price at National Stock Exchange: An empirical investigation. Annual Research Journal of Symbiosis Centre of Management Studies, 3, 89-105.

  • Chatterjee, C. & Mukherjee, P. (2015). Price behaviour around share buyback in the Indian equity market. Global Business Review, 16(3), 425-38. https://doi.org/10.1177/0972150915569931.

  • Kaur & Singh, (2010). Impact of Share Buy-Back Announcements on Stock Prices: Evidence from India. Advances in Management.

  • Kaur, K. & Dhandha, N. (2016). Buy back of shares in India: Impact on Stock Price Returns. EPRA International Journal of Economic and Business Review, 4(7), 94-95.

  • Kaur, K. (2012). Open market share buy back in India. Radix International Journal of Banking, Finance & Accounting, 1(4), 20-40.

  • Manconi, A., Peyer, U. & Vermaelen, T. (2014). Buybacks around the world. European Corporate Governance Institute (ECGI)-Finance Working Paper, 436. https://doi.org/10.2139/ssrn.2330807.

  • Mishra, A. (2005). An empirical analysis of share buybacks in India. ICFAI Journal of Applied Finance, 11(5), 5-24.

  • Purohit, H., Satija, V. D. & Chhatwal, H. S. (2012). Market Reaction around the Buyback Announcements: An Empirical Analysis of Informational Efficiency of Indian Stock Market. IJMIE, 2(7), 30-52. ISSN: 2249-0558. http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.374.8509.

  • Råsbrant, J. (2013). The price impact of open market share repurchases. Available at SSRN 1780967. Accessed on 20.09.2012. http://www.nasdaqomx.com/digitalAssets/76/76006.

  • Shaw, S. & Rakshit. D. (2017). Share repurchase as a tool of financial restructuring: A case study. International Journal of Research in Finance and Marketing (IJRFM), 7(2), 103-11.

  • Varma, U., Singh, H. & Munjal, A. (2018). Corporate restructuring through Share buybacks: An Indian experience. Australasian Accounting, Business and Finance Journal, 12(2), 117-33. https://doi.org/10.14453/aabfj.v12i2.8.


Abstract Views: 265

PDF Views: 82




  • Short Term Effects of Stock Prices as a Result of the Share Buyback Process of Indian it Companies Observed on National Stock Exchange of India During the Years 2013 to 2018

Abstract Views: 265  |  PDF Views: 82

Authors

Santosh Gopalkrishnan
Symbiosis Institute of Business Management, Symbiosis International (Deemed) University, Pune - 412115, Maharashtra, India
Mukta Rajwade
Investment Banking, HSBC, Salarpuria Softzone, Bellandur, Bengaluru, India
Rishabh Garg
Investment Banking, HSBC, Salarpuria Softzone, Bellandur, Bengaluru, India
Raghav Grover
Positive Moves Consulting, Golf Course Road, DLF Phase 5, Sector 43, Gurugram, Haryana, India

Abstract


Share buybacks refer to the repurchasing of shares of stock by the company that issued them. There can be several reasons for a company to go for share buyback:

• To utilise unused cash

• To preserve the share price

• To take benefit of undervalued share

In this study, we examine the effects on the share price as a result of share buyback. It is important to understand the reasons behind undertaking this study. While share buybacks have been chosen by a few companies in the recent past - this becomes a helpful tool to understand performance and motivation for stock market trades placed on stock exchanges in the country. This study could help predict possible price movement of stocks prior to a possible share buyback officially announced by the company. As the companies being discussed are large-cap and stable companies; analysts predict the possibility of a share buyback as a possible alternative well in advance before such an activity actually happens with the company. Hence understanding the possible impact, if any of short term effects of stock prices due to share buyback process on Indian stocks listed on the stock exchanges become important; thereby validating the need for this study.

The target sector and companies selected for this study are Indian IT companies which have undergone buyback in the period 2013 to 2018. This research aims at analysing the past five-year data of top 5 IT companies in India and listed on the National Stock Exchange, i.e., Infosys, HCL Technologies, Wipro, TCS, Tech Mahindra and determine the short term effects of share buyback. Due to excess cash reserves, share buyback has been a common phenomenon in Indian IT companies recently. We shall be taking into account changes in share prices after the buyback announcement. Our analysis will include studying the effects on factors like price volatility, excess returns and value created for the companies, after share buyback.


Keywords


Impact on Stock Prices, Indian IT Companies Stock Prices, Share Buyback.

References