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An
Empirical Analysis of Share Buybacks in India
-- A K Mishra
Share
buybacks have become a common event in the financial markets
worldwide. In a share buyback program, the company distributes
the excess cash flow among the shareholders by way of repurchasing
its own shares, generally at a premium. Among the various
reasons for doing so, the most prominent one is the fact that
the company wants to indicate to the shareholders that it
has huge confidence in itself. In India share buybacks were
introduced in 1998 and have received attention of all major
companies. Since then there has been a spate of announcements
of share buybacks. This paper examines empirically the announcement
period price reaction and whether management is acting in
the best interest of non-tendering shareholders when it engages
in targeted share buyback. An exhaustive list of all the financial
parameters was considered for the purpose of analysis and
the data was collected through online databases. A trend analysis
was performed on various parameters like share prices of these
companies during and post buyback period. Various performance
measures were also used to draw conclusions regarding their
trends from pre-buyback to post-buyback period. The study
finds that for the Indian corporate, the long-term advantages
of share buybacks are not clear. Buyback process is generally
used to improve the shareholding of promoters of the company,
and with a view to impart short-term gains for the investors.
The study points out that buyback norms should be made more
stringent for Indian context, if the companies are to have
a long-term view. In the end, the study lays down possible
directions in which further research could be done on this
topic.
©
2005 IUP. All Rights Reserved.
Market
Timing: An Analytical Framework
-- G Sethu
Market
timing is an important instrument of active portfolio management.
In a debt portfolio, market timing is attempted in response
to the anticipated changes in interest rates. The main tool
of response to these expectations is modification of portfolio's
duration. In an equity portfolio, market timing refers to
response to changes in equity market's risk premium. If the
market were expected to earn high premium (bull phase), an
equity portfolio's systematic risk would be increased. If
the risk premium were to become negative (bear phase), portfolio's
systematic risk would be pruned. In effect, modification of
systematic risk is the instrument of market timing in an equity
portfolio. Investment management literature has tended to
treat market timing of debt portfolio differently from that
of equity portfolio. This paper attempts to view market timing
of different asset classes from a unified point of view. The
paper builds a general, yet elementary model of market timing
that addresses all financial assets. It is shown that sensitivity
of a portfolio's value to changes in the risk premium of the
market would depend on portfolio's duration and its systematic
risk. Under the circumstances specific to different asset
classes, duration management or management of systematic risk
could assume significance. The model proceeds to illustrate
these implications for management of equity, debt and balanced
portfolios.
©
2005 IUP. All Rights Reserved.
Venture
Capital: Global Scenario
-- K B Subhash and T Govindankutty Nair
This
article begins with a brief overview of different stages of
venture capital financing and how venture capital differs
from private equity. The importance of venture capital financing
and the reasons for its importance are explained with the
help of information from some selected economies. The development
and growth in global venture capital from 1997 to 2004, along
with the major players in different regions, are discussed.
The global rankings with respect to venture capital investment,
compound average growth rate, high-tech investment, and buyout
and expansion investments presented here, indicate the trends
in venture capital investment around the world. Another important
aspect covered is the utilization rate of venture capital
and the funds available for further investment, which clearly
bring out the efficiencies and inefficiencies of different
regions in utilization of venture capital amount raised. Finally
the Index of Venture Capital Development (VCDI) is used to
identify to what extent venture capital financing is being
used for promoting high-tech early stage investments in business
ventures with respect to three regions (North America, Europe,
and Asia Pacific), which cover almost 98% of the global venture
capital industry.
©
2005 IUP. All Rights Reserved.
Determinants
of External Equity Finance: Evidence from the Indian Corporate
Sector
-- Jitendra Mahakud
and Prabhas Kumar Rath
This
paper estimates both Panel Data and Time Series models for
empirically identifying the determinants of external equity
finance of the corporate sector in India. An analysis has
also been carried out to gauge the impact of liberalization
on the determinants of external equity finance. The paper
finds that total long-term borrowings, size of the firm, profitability,
growth rate of the firm, and liquidity are the major determinants
of the external equity financing of Indian firms. From time
series analysis it finds that the factors affecting equity
financing clearly depend upon the type of ownership of companies.
©
2005 IUP. All Rights Reserved.
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