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Research Papers | Lambert Academic Publishing | 2012
An Empirical Investigation of Share Repurchases in India

Authors : Chanchal Chatterjee

Publisher : Academicia, South Asian Academic Research Journals,

Publication Place:

Publication year: 2012

ISBN:

 

Abstract

Buyback of shares by companies has become an important corporate tool for financial engineering in the realm of finance especially in the developed nations like USA, Canada, Australia etc. The present paper addresses the issue of share buy backs by companies in India. The central objective of the paper is to make an in-depth and detailed analysis of the share buybacks in India and to understand the impact of such corporate practice on various aspects of an organization using a sample of 20 selected Indian companies. Some traditional tools like Earning per Share (EPS), Return on Investment (ROI), Dividend per Share (DPS) and Market to book value (M/B) ratio have been used for examining the impact of share buyback on such parameters. In addition, some modern techniques like Economic Value Added (EVA), Market Value Added (MVA) and Shareholders Value Added (SVA) have been examined for investigating whether share buybacks facilitate in value creation. For addressing the impact of share buyback on stock prices, the concept of sub-periodic growth rates using econometric models namely, Kinked Exponential Models have been used. Control Sample Methodology has been applied in order to facilitate the analysis of various financial as well as statistical tools. The study observed positive impact of share buyback on EPS and DPS. No significant impact has been noticed on ROI as well as M/B ratio. Moreover the study has not registered any evidence of value creation of the companies through share buyback. A positive impact on stock prices has been found in few cases but not in all the cases as postulated theoretically.

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Chanchal Chatterjee
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