Market Reaction to “Share Buy-Back” of Reliance Industries Limited

Indian corporations currently view share buy-backs as an effective capital management tool that has the potential to increase shareholder value. As a consequence, the level of buy-back activity has intensified in recent years with many corporations engaging in this practice. Share buy-backs were introduced in India in the year 1998. All major corporate have given attention to this concept and today India is a well known face in the financial market for this reason. Companies in India can buy-back their share either through open market route or through tender offer route. Majority of companies have been using the open market route through stock exchange. It was found out that RIL has underperformed the benchmark with poor returns prior to the announcement of buy-back, indicating undervaluation of shares and positive abnormal return in the post announcement indicating signaling effect of share buy-back during 2011-2013. This paper examines the reaction of market on the announcement of share buy-back of RIL.

Keywords: Share Buy-back, Reliance Industries Limited (RIL), Market reaction