Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India
Executive Summary This 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...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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SAGE Publishing
2015-12-01
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| Series: | Vikalpa |
| Online Access: | https://doi.org/10.1177/0256090915611773 |
| _version_ | 1797840132180541440 |
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| author | Chanchal Chatterjee Paromita Dutta |
| author_facet | Chanchal Chatterjee Paromita Dutta |
| author_sort | Chanchal Chatterjee |
| collection | DOAJ |
| description | Executive Summary This 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. |
| first_indexed | 2024-04-09T16:09:42Z |
| format | Article |
| id | doaj.art-4700c80160254d599a781145047b2b5d |
| institution | Directory Open Access Journal |
| issn | 0256-0909 2395-3799 |
| language | English |
| last_indexed | 2024-04-09T16:09:42Z |
| publishDate | 2015-12-01 |
| publisher | SAGE Publishing |
| record_format | Article |
| series | Vikalpa |
| spelling | doaj.art-4700c80160254d599a781145047b2b5d2023-04-24T11:48:01ZengSAGE PublishingVikalpa0256-09092395-37992015-12-014010.1177/0256090915611773Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in IndiaChanchal Chatterjee0Paromita Dutta1is currently working as an Assistant Professor in the Finance Area at the International Management Institute, Kolkata, India. A gold medalist in the Masters, he has received many prestigious awards for academic excellence. He has a Ph.D in Financial Restructuring, for which he obtained the best research award in the Finance Track in the 3rd Doctoral Colloquium from IIM Ahmedabad in 2010. His doctoral dissertation has been published in the form of a book by an international publisher based in Germany. He has published more than 20 research papers in refereed journals and has presented papers in several international conferences. His research interest includes corporate finance, corporate governance, and corporate payout policy. e-mail: is currently working as an Assistant Professor of Accounting and Finance at St. Xavier’s College, Kolkata, India. She is pursuing her doctoral research in the area of financial economics from the University of Calcutta, India. She has published several research papers in reputed refereed journals. Her areas of research interest include corporate finance and banking. e-mail: Executive Summary This 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.https://doi.org/10.1177/0256090915611773 |
| spellingShingle | Chanchal Chatterjee Paromita Dutta Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India Vikalpa |
| title | Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India |
| title_full | Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India |
| title_fullStr | Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India |
| title_full_unstemmed | Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India |
| title_short | Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India |
| title_sort | anomalous price behaviour around open market stock repurchase announcements in india |
| url | https://doi.org/10.1177/0256090915611773 |
| work_keys_str_mv | AT chanchalchatterjee anomalouspricebehaviouraroundopenmarketstockrepurchaseannouncementsinindia AT paromitadutta anomalouspricebehaviouraroundopenmarketstockrepurchaseannouncementsinindia |