scholarly journals An Empirical Study of the Differential Market Reaction to Open-Market Stock Repurchase Announcements

2011 ◽  
Vol 18 (4) ◽  
Author(s):  
Zhenhu Jin
Keyword(s):  
Stock Price ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Open Market ◽  
Costs And Benefits ◽  
Stock Repurchase ◽  
Price Reaction ◽  
Stock Price Reaction ◽  
Specific Factors ◽  
Repurchase Announcements

<p class="MsoBodyText2" style="text-align: justify; margin: 0in 0.5in 0pt; tab-stops: .5in;"><span style="font-size: 10pt;"><span style="font-family: Times;">Significant positive stock price reaction to stock repurchase announcements has been well documented in the finance literature.<span style="mso-spacerun: yes;">&nbsp; </span>Most studies on repurchase focus on the average positive reaction; however, 30 percent of the repurchasing firms experience negative abnormal returns at announcement.<span style="mso-spacerun: yes;">&nbsp; </span>This study examines the apparent heterogeneity in the stock price reaction to stock repurchase.<span style="mso-spacerun: yes;">&nbsp; </span>The results show that the market reaction to repurchase announcements is determined by firm specific factors and is based on the overall costs and benefits analysis by the market of the stock repurchase program.<span style="mso-spacerun: yes;">&nbsp; </span>The results are consistent with conventional signaling models and agency theories.</span></span></p>

scholarly journals Leverage and the wealth gains from acquisition program announcements

2010 ◽  
Vol 8 (1) ◽  
pp. 267-280
Author(s):  
Gurmeet Singh Bhabra ◽  
Harjeet S. Bhabra ◽  
Glenn W. Boyle
Keyword(s):  
Full Advantage ◽  
Stock Price ◽  
Market Reaction ◽  
Abnormal Returns ◽  
Tobin's Q ◽  
Price Reaction ◽  
Investment Opportunities ◽  
Stock Price Reaction ◽  
The Mean ◽  
Increasing Function

We examine the market reaction to announcements of an intention to pursue a program of external acquisitions. Although the mean gain is positive, only firms with high Tobin’s q and low leverage experience significant abnormal returns. For firms with low q or high leverage, abnormal returns are zero. Moreover, the stock price reaction is an increasing function of q only for firms with low leverage. These results are consistent with the view that high leverage reduces the ability of a firm to take full advantage of profitable investment opportunities.

The post-repurchase announcement drift: an anomaly in disguise?

2015 ◽  
Vol 41 (2) ◽  
pp. 205-224 ◽  
Author(s):  
Thanh T. Nguyen ◽  
Ninon K. Sutton ◽  
Dung (June) Pham
Keyword(s):  
Stock Price ◽  
Abnormal Returns ◽  
Open Market ◽  
Calendar Time ◽  
Stock Repurchase ◽  
Earnings Announcement ◽  
Content Type ◽  
Post Earnings Announcement Drift ◽  
Earnings Performance ◽  
Repurchase Announcements

Purpose – The purpose of this paper is to reexamine the stock price drifts after open-market stock repurchase announcements by differentiating actual repurchases from repurchase announcements and by controlling for the repurchasing firms’ earnings improvement in the announcement year relative to the prior year. Design/methodology/approach – The authors use the calendar-time method and matching method based on different criteria to calculate the post-announcement abnormal returns. Findings – The results show that only firms actually repurchasing their shares exhibit a positive post-announcement drift. More importantly, the authors find that these repurchasing firms have the same post-announcement drift as their matching firms that have similar size and earnings performance but do not repurchase. This supports the argument that the post-repurchase announcement drift found in previous studies is not a distinct anomaly but the post-earnings announcement drift in disguise. Social implications – The post-repurchase announcement drift found in previous studies is the post-earnings announcement drift in disguise. Originality/value – The study shows that because high earnings performance positively relates to real repurchase activities, controlling for earnings performance in examining whether a drift occurs after repurchase announcements.

Stock market reaction to cash dividends: evidence from the Nigerian stock market

2019 ◽  
Vol 45 (3) ◽  
pp. 366-380
Author(s):  
Friday Kennedy Ozo ◽  
Thankom Gopinath Arun
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Stock Price ◽  
Abnormal Returns ◽  
Cash Dividend ◽  
Content Type ◽  
Price Reaction ◽  
Stock Market Reaction ◽  
Dividend Announcements ◽  
Stock Price Reaction

PurposeVery little is known about the effect of dividend announcements on stock prices in Nigeria, despite the country’s unique institutional environment. The purpose of this paper is, therefore, to provide empirical evidence on this issue by investigating the stock price reaction to cash dividends by companies listed on the Nigerian Stock Exchange.Design/methodology/approachStandard event study methodology, using the market model, is employed to determine the abnormal returns surrounding the cash dividend announcement date. Abnormal returns are also calculated employing the market-adjusted return model as a robustness check and to test the sensitivity of the results toβestimation. The authors also examine the interaction between cash dividends and earnings by estimating a regression model where announcement abnormal returns are a function of both dividend changes and earnings changes relative to stock price.FindingsThe study find support for the signaling hypothesis: dividend increases are associated with positive stock price reaction, while dividend decreases are associated with negative stock price reaction. Companies that do not change their dividends experience insignificant positive abnormal returns. The results also suggest that both dividends and earnings are informative, but dividends contain information beyond that contained in earnings.Research limitations/implicationsThe sample for the study includes only cash dividend announcements occurring without other corporate events (such as interim dividends, stock splits, stock dividends, and mergers and acquisitions) during the event study period. The small firm-year observations may limit the validity of generalizations from these conclusions.Practical implicationsThe findings are useful to researchers, practitioners and investors interested in companies listed on the Nigerian stock market for their proper strategic decision making. In particular, the results can be used to encourage transparency and good governance practices in the Nigerian stock market.Originality/valueThis paper adds to the very limited research on the stock market reaction to cash dividend announcements in Nigeria; it is the first of its kind employing a unique cash dividends data.

scholarly journals Stock price reaction to cash dividend announcements in Vietnam

2017 ◽  
Vol 24 (02) ◽  
pp. 74-89
Author(s):  
Truong Nguyen Xuan ◽  
Huong Dao Mai ◽  
Anh Nguyen Thi Van
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Cash Dividend ◽  
Share Prices ◽  
Price Reaction ◽  
Cumulative Abnormal Returns ◽  
Stock Price Reaction ◽  
The Uk

This study attempts to investigate the stock price reaction to divi-dend announcements using data of Vietnamese listed firms on Hochiminh Stock Exchange (HOSE). Standard event study meth-odology has been employed on a sample of 198 cash dividend an-nouncements made in 2011. The results show that stock prices react significantly and positively to the announcements of cash dividends, including both dividend increasing and dividend decreasing events. It is also plausible that cumulative abnormal returns exhibit an in-creasing trend before announcement yet a decreasing trend after announcement dates. More specifically, we find positively signifi-cant cumulative abnormal returns of around 1.03% on announce-ment dates; other larger windows also demonstrate positive abnor-mal returns of around 1.3%. In addition, cash dividends have differ-ent effects on share prices of firms from different industries. These results support the signaling hypothesis and are also consistent with prior findings of empirical research done on more developed mar-kets, i.e. the US and the UK.

scholarly journals Underreaction to open market share repurchases,

2019 ◽  
Vol 30 (80) ◽  
pp. 172-185 ◽  
Author(s):  
F. Henrique Castro ◽  
Claudia Yoshinaga
Keyword(s):  
Factor Model ◽  
Abnormal Returns ◽  
Open Market ◽  
Stock Repurchase ◽  
Long Run ◽  
Average Abnormal Return ◽  
Fama And French ◽  
Repurchase Announcements ◽  
Buy Back ◽  
Term Performance

ABSTRACT This article aims to investigate the long-term performance of a portfolio of firms that announced the repurchase of their own stocks in the Brazilian market from 2003 to 2014. Open market stock repurchase is a means to distribute cashflow to shareholders. Some of the reasons for a firm to buy back its own stocks are: to adjust its capital structure; to reduce excessive cash levels; as an alternative to dividends; and signaling to the market in order to reduce information asymmetry between the firm and its investors. If the signaling hypothesis is true, then forming a portfolio with shares that announce repurchases generates abnormal returns in the long run. Our results show that repurchase announcements in the open market signal stock underpricing, and abnormal returns can be earned using this strategy. Results are inconsistent with the semi-strong form of the efficient markets hypothesis, which states that one cannot earn abnormal returns with publicly available information. We obtained abnormal returns using the capital asset pricing model (CAPM) and Fama and French three-factor model. Additionally, we divided the sample in growth and value firms. We found that the average abnormal return for firms that announce repurchase programs ranges from 5.4% to 7.9% for up to a 3-year period after the announcement. For value companies (more likely to repurchase stocks due to undervaluation), abnormal returns can reach up to 11.5% per year.

Bank Stock Returns And Quarterly Earnings: Price Responses To Imminent Earnings Announcements

2011 ◽  
Vol 11 (2) ◽  
pp. 135 ◽  
Author(s):  
Thomas F. Gosnell ◽  
Andrea J. Heuson ◽  
Robert E. Lamy
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Earnings Announcements ◽  
Abnormal Returns ◽  
Quarterly Earnings ◽  
Price Reaction ◽  
Earnings Information ◽  
Bank Stock Returns ◽  
Stock Price Reaction ◽  
Bank Stock

Numerous studies have documented that most of the stock price reaction to earnings announcements have occurred by the time the earnings information is made public. This study considers stock price reaction during the time period between the end of the accounting calendar when the forthcoming earnings information is ostensibly available to top management and the earnings release date to measure anticipatory price responses to imminent quarterly earnings announcements. Using bank stocks, the results indicate that portfolios composed of banks that eventually announce improved earnings show significant positive abnormal returns soon after the close of the accounting quarter while portfolios composed of banks that eventually publicize poor profit performance exhibit significant negative abnormal returns.

Going Private Buyouts and Determinants of Shareholders' Returns

1993 ◽  
Vol 8 (1) ◽  
pp. 1-25 ◽  
Author(s):  
Nickolaos G. Travlos ◽  
Marcia Millon Cornett
Keyword(s):  
Capital Structure ◽  
Ownership Structure ◽  
Stock Price ◽  
Agency Costs ◽  
Abnormal Returns ◽  
Going Private ◽  
Price Reaction ◽  
Structure Changes ◽  
Stock Price Reaction ◽  
Alternative Sources

This paper examines the effect on stock and nonconvertible bond prices of going private buyout proposals and explores sources of stock price reaction. Three alternative sources of abnormal returns are analyzed: the elimination of stockholders' servicing cost, the capital structure changes resulting from borrowings to take the firm private, and the elimination of agency costs associated with the prebuyout ownership structure. The findings indicate that going private buyouts generate large benefits to the firms' owners by eliminating the agency costs prevailing in the firms prior to going private.

scholarly journals REAKSI SAHAM INDEKS JII TERHADAP PENGUMUMAN RESHUFFLE KABINET KERJA TAHUN 2015 DI BURSA EFEK INDONESIA

2020 ◽  
Vol 7 (1) ◽  
pp. 36
Author(s):  
Herizka Ayuk Arviani ◽  
Rikha Muftia Khoirunnisa
Keyword(s):  
Stock Prices ◽  
Stock Price ◽  
Trading Volume ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
T Test ◽  
Price Reaction ◽  
Before And After ◽  
Stock Price Reaction ◽  
The Difference

This study aims to determine the speed of JII stock price reaction on the Indonesia Stock Exchange around the date of the announcement of the Working Cabinet reshuffle and to analyze the difference in average trade volume in the period before and after the announcement of the Working Cabinet reshuffle. This data collection technique uses population techniques taken by 30 companies in the JII Index for the period June - November 2015 with observation period 10 days before and 10 days after the announcement. Analysis tools that are used to determine the reaction of stock prices before and after using one sample t test while the analytical tool to distinguish the average trading volume using paired sample t test using an alpha level (α) of 10%. The results of the analysis of stock price reactions indicate that there is a JII stock price reaction at Indonesia Stock Exchange in the period before and after the announcement of the Working Cabinet reshuffle. Because abnormal returns occur at H-7, H-4, H-1, H0, H + 1, H + 7 and H + 10. And the results of the average volume test that is there is a difference in the average trading volume before and after the announcement of the Working Cabinet reshuffle. This can be seen from the significance value lower than alpha 10% (0.033 <0.0.1).

Wealth Effects of Retail Store Closure Announcements

2020 ◽  
Vol 23 (02) ◽  
pp. 2050013
Author(s):  
Abdul-Rahman Khokhar
Keyword(s):  
Stock Price ◽  
Market Reaction ◽  
Wealth Effects ◽  
Cross Sectional ◽  
Price Reaction ◽  
Stock Market Reaction ◽  
Announcement Date ◽  
Stock Price Reaction ◽  
Study Methodology ◽  
Sectional Analysis

This is the first study, to the best of our knowledge, to use value- and equal-weighted portfolios of U.S. retail firms to examine the stock market reaction to strategic and nonliquidating store closure announcements. Using event study methodology for a sample of 174 hand-collected store closure announcements during the period 1980–2017, we find a negative and significant stock price reaction on the announcement date. Given the highly competitive nature of the retail industry, we further investigate the market reaction for the closest competitors using a matched sample of 157 competing firms. We report a positive, albeit less significant stock price reaction for competing retail firms on the announcement date. Finally, a cross-sectional analysis shows that the stock price reaction to store closure announcements is positively associated with firm size.

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