Market Timing Ability of Indian Firms in Open Market Repurchases
AbstractThe paper examines the market timing ability of Indian fi rms engaged in open market repur- chases. The study is primarily motivated by the unique disclosure feature of repurchases in India, where the disclosures are far more frequent than in any other market. We find that the repurchasing firms in India are able accumulate shares at favorable prices similar to the US market. However, the cost savings do not translate into signifi cant wealth creation for the insiders as indicated by the short-run and long-run abnormal returns. This is contrary to the evidence from markets like the US. Further, the cross-sectional variations in the cost savings from repurchase execution in India are explained by the overall market returns and not by firm characteristics. These fi ndings contrast with that of US, where the firm characteristics signi ficantly explain the cross-sectional variation in the savings measure. It appears that the more frequent disclosure of repurchase activity in India cripples the market timing ability by reducing the information asymmetry between the firm and the outsiders. This conclusion is further supported by the irrelevance of the past or concurrent stock returns in explaining the time variation in the repurchase activity of fi rms.
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