Open-Market Stock Repurchase Announcements and Revaluation of Prior Accounting Information

CFA Digest ◽  
1998 ◽  
Vol 28 (1) ◽  
pp. 42-44
Author(s):  
Bruce D. Phelps
Keyword(s):  
Accounting Information ◽  
Open Market ◽  
Stock Repurchase ◽  
Repurchase Announcements

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.

CEO Optimism and the Credibility of Open-Market Stock Repurchase Announcements

2017 ◽  
Vol 19 (1) ◽  
pp. 49-61 ◽  
Author(s):  
Thanh Nguyen ◽  
Liem T. Nguyen ◽  
Anh Duc Ngo ◽  
Hari Adhikari
Keyword(s):  
Open Market ◽  
Stock Repurchase ◽  
Repurchase Announcements

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.

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>

Stock Returns and Open-Market Stock Repurchase Announcements

1997 ◽  
Vol 32 (4) ◽  
pp. 709-728 ◽  
Author(s):  
Chao-Shin Liu ◽  
David A. Ziebart
Keyword(s):  
Stock Returns ◽  
Open Market ◽  
Stock Repurchase ◽  
Repurchase Announcements
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