A Study of Tender Offer Buyback and its Share Price Performance in India

Authors

  •   Urvashi Varma Research Scholar, Amity University, Noida
  •   Alka Munjal Dean - Students Academic Affairs and Support Services, Amity University, Noida

DOI:

https://doi.org/10.17010/ijf/2016/v10i9/101479

Keywords:

Share Buyback

, Tender Offers, and Abnormal Return

G15

, G32, G35

Paper Submission Date

, May 19, 2015, Paper sent back for Revision, February 7, 2016, Paper Acceptance Date, March 5, 2016.

Abstract

Almost 90% of the 54 public announcements for tender offer buyback between 2004 to 2013 suggested that their primary need for buyback is to increase the overall shareholder value for long term shareholders. The other important drivers are capital structure correction, improvement of earnings per share through buyback, effective utilization of surplus cash, and improvement in return ratios like return on net worth and return on asset. The study tried to investigate using a sample of 54 companies the significant drives using discriminant analysis for tender offer repurchase in India. Capital structure correction is the most significant driver for tender offer buybacks in the study. The paper also deployed the event study mechanism to see if there was any change in the share price on the day of the buyback announcement. The abnormal return calculated using market model indicated a positive reaction of the market on the day next to buyback announcement and reemphasised that companies are able to create value for their shareholders through tender offer share buyback.

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Published

2016-09-01

How to Cite

Varma, U., & Munjal, A. (2016). A Study of Tender Offer Buyback and its Share Price Performance in India. Indian Journal of Finance, 10(9), 53–65. https://doi.org/10.17010/ijf/2016/v10i9/101479

Issue

Volume 10, Issue 9, September 2016

Section

Articles
Crossref
Scopus
Google Scholar
Europe PMC

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