Stock market reaction to buyback announcement of Reliance Industries Ltd.: An empirical study

Abstract

The Reliance Industries Ltd. announced its third and the biggest ever stock buyback program on 20th January, 2012. The rational of the buyback of equity program was to signal to the market on perceived undervaluation of the share. The main objective of the paper is to ascertain the market reaction to the announcement of the buyback program by the Reliance Industries Ltd. The present study is undertaken from January, 2012 to July, 2013 and the paper employs 30 day before and 30 day after the announcement day i.e., 61 day as window period. The findings of the study include a) the market reacted positively to the buyback announcement, b) the poor quarterly financial results affected the abnormal returns adversely in the short run and c) the turnover, net profit and earnings per share increased from one quarter to another sequentially in the post buyback period.