Abstract
Repurchase of shares by Indian firms are on the rise in recent years. What motivates Indian firms to repurchase their own shares? Signalling and free cash flow hypotheses are two competitive and popular explanations identified in empirical research in US and other countries. Do Indian firms buy back their shares to correct market misevaluations or to return excess funds? In the present paper an effort is made to decipher the motives behind repurchase decisions of Indian firms. Since there are positive returns only on announcement day and not in post-announcement days the signalling hypothesis cannot be an explanation for positive overall CAR in Indian announcements. The study hypothesizes that Indian firms use repurchases as a part of overall corporate restructuring mechanism of distributing excess funds and build promoters' stake holding. The evidence shows that low-q firms with higher free cash flow ratio earn higher abnormal returns than other firms. The cross-sectional analysis generates positive coefficient for low-q firms with higher cash flow and promoters' control.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
