Price Behaviour Around Share Buyback in the Indian Equity Market

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This article examines whether board qualities influence the earnings management behaviour of firms in a large emerging market set-up by using panel data of 783 Indian private manufacturing firms over a period of 7 years (April 2009–March 2016). The study finds that it is board quality that helps in curbing earnings manipulation and not just board independence. Results reveal that diligent and busy boards help in reducing earnings management, CEO duality affects the quality of reported earnings and promoters’ influence on boards increases earnings management. Domestic or foreign institutional investors do not have any independent impact on earnings management. However, domestic institutional ownership reduces earnings management when promoters’ influence exists. The article contributes to the literature by focusing on whether corporate governance (CG) mechanisms are important in curbing earnings management in an emerging market context. The findings are expected to be helpful to policymakers and regulators while framing appropriate CG policies and regulations.

Section: Data Source and Sample Framementioning

confidence: 99%

Board Quality and Earnings Management: Evidence from India

Chatterjee

2019

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“…The information on dividend announcements and the stock prices is procured from ‘Prowess’, a widely used and highly reliable corporate database, maintained by the Centre for Monitoring Indian Economy (CMIE). The Prowess database has formed the basis of several published empirical studies on the Indian corporate sector (for instance, Chatterjee & Mukherjee, 2015; Sarkar, Sarkar & Sen, 2008; etc.). Table 1 presents the summary statistics related to the dividend announcements.…”

Section: Methodsmentioning

confidence: 99%

Price Behaviour Around Dividend Announcements in the Indian Equity Market in the Existence of Corporate Dividend Tax

Chatterjee

Dutta

2017

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This article empirically examines the price behaviour around cash dividend announcements of the firms listed on the National Stock Exchange of India Ltd (NSE) in order to understand whether dividend announcements really influence stock returns in the market and carry meaningful information to the investors in the existence of corporate dividend tax. The article uses standard ‘event study’ methodology based on market model on a sample of 210 dividend announcements. Subsample analysis is employed for further analysis of firms of different categories. The study finds that cash dividend announcements do not necessarily generate abnormal stock returns in an emerging market, such as India. The whole sample is further divided into various subsamples on the basis of firm size and the size of payout ratio. The study finds that large payout firms experience greater stock returns compared to the smaller payout firms just after the dividend announcements. However, stock returns following dividend announcements do not vary across firm size. This article provides evidence to the managers about the non-linkage between cash dividend announcements and stock returns in an emerging market like India. This finding is contrary to the findings of many other studies that are based on the data of the developed economies.

“…The analysis is based on the event study which has been applied in different contexts by many researchers. The methodology has been applied to gauge, among others, the impact of mergers and acquisitions (Anand & Singh, 2008; Kalra, Gupta, & Bagga, 2013), share buyback announcements (Chatterjee & Mukherjee, 2015) and dividend announcements (Maitra & Dey, 2012). The methodology has been used to assess the impact of marketing-related decisions like celebrity endorsements (Jaikumar & Sahay, 2015; Liu & Brock, 2011) and brand extension announcements (Lane & Jacobson, 1995).…”

Section: Methodsmentioning

confidence: 99%

“…The market model method has been used in the present study which has earlier been applied in numerous studies (Chatterjee & Mukherjee, 2015; Jaikumar & Sahay, 2015).…”

Section: Methodsmentioning

confidence: 99%

Impact of Automobile Recalls on Stock Prices: A Study in the Indian Context

Singh¹

2017

Not so long ago, ‘product recalls’ in the Indian automobile sector were a novelty. The defective vehicles were repaired as part of the after-sales service. In the absence of a strong regulatory framework, the manufacturers were under no obligation to proactively initiate product recalls. The introduction of a voluntary code on product recalls by the Society of Indian Automobile Manufacturers (SIAM) in 2012 and introduction/amendments in the existing legal regimen of the country in recent years have led companies to take more than just baby steps towards product recalls. Product recalls are a case of management failure. There is a need for gauging the impact of this failure on the stock price of the manufacturers, especially in the Indian context where the recall phenomenon is poised to gain further momentum. The event study methodology is a widely used approach to assess the impact of a particular event/announcement on the stock price. This methodology was used in the present study to gauge whether abnormal stock returns accrued to the manufacturers during 13 product recall announcements made in the Indian automobile sector between 1 January 2010 and 31 December 2015. The study found that product recall announcements generated small and statistically insignificant cumulative abnormal returns (CAR) of –0.02 per cent in the (–1, +1) event window, 0.92 per cent in the (–2, +2) event window and 1.70 per cent in the (–5, +5) event window. The study found no substantial or statistically significant difference in the CAR generated during big recalls and small recalls. Furthermore, the study found little evidence that CAR generated during recalls where defective component(s) in the vehicle were repaired is positive as compared to CAR generated when such component(s) were replaced.