Capital restructuring through share buyback and its impact on value of companies in India

Abstract

The study has led to the conclusion that dividend policy adopted by corporate managers remains unaffected by the initiation of share buybacks. Managers are concerned about the financial reporting and manage the earnings through share buyback. The announcement of share buyback positively influences the stock prices on the event day, but the incidence of abnormal return surrounding share buyback is random. Further, share buyback do not influence the value of the firm and is directed towards a short-term strategy. Thus, share buybacks in Indian Stock Market are increasingly used to manage reported earnings, revitalize the turbulent stock market and distribute surplus cash flows among shareholders to reduce agency conflict. Further research is required to gauge the magnitude of changes and year-wise effect. newline