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A minimum buyback requirement in open market repurchases: Impact on the signaling role

Author

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  • Srivastava, Pranjal
  • Jacob, Joshy
  • Pandey, Ajay

Abstract

The paper investigates the impact of the imposition of a minimum buyback requirement on open market repurchases (OMRs) in India. We extend the signaling model of Oded (2005) by including a minimum buyback requirement and show that it increases the stock price during the repurchase period, relative to a no minimum buyback regime. Accordingly, we find that the regulatory change has led to a significant increase in the abnormal stock returns earned around buyback announcements. Also, insiders increase their purchase of firms’ stock during the buyback execution period relative to the pre-reform period. These findings are consistent with a higher information value of OMR announcements in the minimum buyback regime. We further observe lower market timing through buyback execution, accompanied by a change in the execution-style, implying a weaker instinct for opportunistic buybacks. Our findings suggest that the regulatory change has lowered the “cheap-talk” motives associated with the announcement of open market buybacks.

Suggested Citation

  • Srivastava, Pranjal & Jacob, Joshy & Pandey, Ajay, 2026. "A minimum buyback requirement in open market repurchases: Impact on the signaling role," Journal of Corporate Finance, Elsevier, vol. 98(C).
    • Handle: RePEc:eee:corfin:v:98:y:2026:i:c:s0929119925002093
    DOI: 10.1016/j.jcorpfin.2025.102941
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    Keywords

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    JEL classification:

    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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