The Credibility of Open Market Share Repurchase Signaling

2012 ◽  
Vol 47 (5) ◽  
pp. 1059-1088 ◽  
Author(s):  
Ilona Babenko ◽  
Yuri Tserlukevich ◽  
Alexander Vedrashko
Keyword(s):  
Stock Returns ◽  
Market Share ◽  
Firm Value ◽  
Share Repurchase ◽  
Open Market ◽  
Announcement Returns ◽  
Repurchase Announcements

AbstractOpen market share repurchase announcements are commonly associated with equity undervaluation, but their signal about firm value can often be misleading. We conjecture that executives who buy shares of their firm before an announcement add credibility to the undervaluation signal. Consistent with this hypothesis, we find that announcement returns are positively related to past insider purchases, especially for firms that are priced less efficiently. Firms whose insiders bought more shares are also more likely to complete their repurchase plans. Finally, we find that insider purchases predict post-announcement stock returns.

Does Share Repurchase Announcement Lead to Rise in Share Price? Evidence from India

2019 ◽  
Vol 20 (2) ◽  
pp. 420-433
Author(s):  
Paramita Mukherjee ◽  
Chanchal Chatterjee
Keyword(s):  
Stock Returns ◽  
Market Share ◽  
Share Price ◽  
Share Repurchase ◽  
Open Market ◽  
Individual Basis ◽  
Increasing Trend ◽  
Excess Stock Returns ◽  
Repurchase Announcements

In recent years, there is an increasing trend of share repurchase announcement by Indian firms. This article attempts to examine whether open market share repurchase announcements in India lead to excess stock returns and to identify the factors responsible for additional stock returns. Apart from a standard market method, the price behaviour is examined on an individual basis. The results show that the firms, on an average, do not experience price improvement after share repurchase. While 24 per cent of the firms lose and 10 per cent gain, the rest experience no change. In normal times, investors prefer small-cap companies, but post-announcement, promoters’ share and premium play an important role.

scholarly journals What Drives the Declining Wealth Effect of Subsequent Share Repurchase Announcements?

2020 ◽  
Vol 13 (8) ◽  
pp. 176
Author(s):  
David K. Ding ◽  
Hardjo Koerniadi ◽  
Chandrasekhar Krishnamurti
Keyword(s):  
United States ◽  
Multivariate Regression ◽  
The United States ◽  
Share Repurchase ◽  
Open Market ◽  
Test Results ◽  
Regression Test ◽  
Announcement Returns ◽  
Repurchase Announcements ◽  
Period Return

Recent academic studies document that open market share repurchase announcements in the United States generate significantly lower returns than those reported in earlier studies. We find that the lower announcement return is associated with an increasing number of subsequent announcements in the more recent periods. Although the announcement period return from the initial announcement is positive, subsequent announcement returns are significantly decreasing. Further, we find that the decreasing returns of subsequent announcements are attributed to firms with negative past repurchase announcement returns. Our multivariate regression test results are consistent with the notion that the decreasing subsequent repurchase announcement returns are driven by hubris-endowed managers.

Insider Trading and Firm Performance Following Open Market Share Repurchase Announcements

2014 ◽  
Vol 41 (1-2) ◽  
pp. 156-184 ◽  
Author(s):  
Hsuan-Chi Chen ◽  
Sheng-Syan Chen ◽  
Chia-Wei Huang ◽  
John D. Schatzberg
Keyword(s):  
Firm Performance ◽  
Market Share ◽  
Insider Trading ◽  
Share Repurchase ◽  
Open Market ◽  
Repurchase Announcements

scholarly journals Anomalous Price Behaviour around Open Market Stock Repurchase Announcements in India

2015 ◽  
Vol 40 (4) ◽  
pp. 435-443 ◽  
Author(s):  
Chanchal Chatterjee ◽  
Paromita Dutta
Keyword(s):  
Stock Returns ◽  
Abnormal Returns ◽  
Market Model ◽  
Share Repurchase ◽  
Open Market ◽  
Announcement Date ◽  
Event Date ◽  
Abnormal Stock Returns ◽  
Repurchase Announcements ◽  
The Impact

Executive SummaryThis article examines the impact of open market share repurchase announcements on stock returns in the Bombay Stock Exchange (BSE). The main objective is to examine whether share repurchase announcements under the open market route have any significant impact on the returns of the stocks traded in the BSE. The article covers the period from 2009 to 2013. For sample selection, two criteria were used: first, the firm should have been listed in the BSE for at least 28 trading days before the repurchase announcement date, and second, the firm should have all relevant data required by this study. A total of 95 repurchase announcements fulfilled these criteria. The analysis period extended from –28 to +28 trading days relative to the repurchase announcement date ( t = 0). The findings of the study will help us to understand how the market responds to share repurchase announcements in India and whether a firm actually benefits by repurchasing its own shares from the market.This study uses a standard event methodology based on an ordinary least squares market model with the aim of finding out whether repurchase announcements generate any abnormal return around the repurchase announcement date. While applying the market model for estimating the abnormal returns, the regression is estimated based on the stock return of the firm and market return of the previous 120 trading days. So, here the estimation window takes into account 120 observations. Using this, the expected returns are generated and then the abnormal returns are derived for the event window, 28 days prior to the event date and 28 days after the event date.The findings of the study indicate that share repurchase announcements do not necessarily generate abnormal stock returns in the Indian equity market unlike developed economies like the US, Canada, and Australia. The whole sample is further divided into various subsamples on the basis of firm size and size of repurchase. The subsample analyses reveal that smaller firms do not necessarily experience higher abnormal stock returns following repurchase announcements than that of the larger firms. The findings weakly support the view that larger repurchase size generates greater abnormal stock returns than the smaller ones.

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