Market Response to Share Buyback Announcements in the Bombay Stock Exchange

Abstract

This paper empirically examines the impact of Open Market stock repurchase announcements on stock prices' growth rates in the Bombay Stock Exchange covering the period from July 2008 to September 2012 by using the econometric models of sub-periodic growth rates estimation - Kinked Exponential Models. The results show a mixed impact of share repurchase announcements on stock prices growth rates. The entire sample is then divided into sub-samples based on size of buyback, firm size and type of industry. The findings reflect that, mid-cap firms register higher stock prices' growth rates compared to large-cap and small-cap firms. The findings also show that, size of repurchase is positively associated with the stock prices' growth rates. Finally, the stock price response to share repurchase announcements is found to be favourable for services sector firms than that of the non services sector firms.