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IMPACT OF BUYBACKS ON SHARE PRICE PERFORMANCE OF COMPANIES IN INDIAN CONTEXT

Kavita Chavali

School of Business - Alliance University, India

 

S. Shemeem

School of Business - Alliance University, India

ABSTRACT

This paper aims to investigate the impact of buybacks on the share price performance of a sample of 75 buybacks announced by companies listed in the National Stock Exchange of India Ltd. for the period beginning January 2000 to December 2010. The sample is selected using Random sampling method. The study employs the Market Model-Event Study Methodology with event window of 41 days (20 days prior to announcement and 20 days post announcement) and announcement date (An date, t0) as the event date, to examine the market reaction. The findings indicate that the market reacts positively with significantly positive Average Abnormal Returns on t0 and t+1 days. The Average Abnormal Return on the announcement day is 1.07 percent and Cumulative Average Abnormal Return is 1.59 percent.

Key words: Buyback, Market Model, Event study, Stock returns