Impact of Buyback of Shares on Financial Performance and Market Value of Firms: A Study of Selected Indian It Companies

Abstract

It involves the company using its available cash reserves or raising debt to buy back shares either on the open market or directly from shareholders through a tender offer. There are several factors that influences companies to execute share buybacks. They are not governed by a single factor. Undervaluation, signaling, free cash flows, avoidance of hostile takeovers, improving financial performance through improved EPS, P/E ratio, and ROE, overall Market Value through improved Market Value of equity and reduced book value of debts, and other such factors influence a company's decision to buy back shares.