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Stock Repurchase and Excess Returns: An Empirical Examination

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  • Pugh, William
  • Jahera, John S, Jr

Abstract

The excess returns associated with repurchase announcements are viewed largely as a reaction to management's statement that the firm's shares are underpriced; management's signal provides new information that enhances the firm's market value. Although earlier studies have found the excess return to be closely related to the premium set by management, other factors play a part in determining both the market reaction and the premium level set by management. Among these factors are relative market capitalization, holding by institutions, immediate alternative uses for cash, the level of insider control, recent stock price performance, the relative size of the tender offer, and the resultant change in the firm's capital structure. Copyright 1990 by MIT Press.

Suggested Citation

  • Pugh, William & Jahera, John S, Jr, 1990. "Stock Repurchase and Excess Returns: An Empirical Examination," The Financial Review, Eastern Finance Association, vol. 25(1), pages 127-142, February.
    • Handle: RePEc:bla:finrev:v:25:y:1990:i:1:p:127-42
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    Cited by:

    1. Maria K. Markopoulou & Demetrios L. Papadopoulos, 2009. "An empirical investigation on the capital structure signalling theory of companies listed in the Greek Stock Exchange," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(3), pages 217-238.
    2. Bechman, Ken L. & Raaballe, Johannes, 2006. "Taxable Cash Dividends," Working Papers 2005-4, Copenhagen Business School, Department of Finance.
    3. William Rees, 1996. "The impact of open market equity repurchases on UK equity prices," The European Journal of Finance, Taylor & Francis Journals, vol. 2(4), pages 353-370.
    4. Firth, Michael & Leung, T.Y. & Rui, Oliver M., 2010. "Double signals or single signal? An investigation of insider trading around share repurchases," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(4), pages 376-388, October.
    5. Jason Mitchell & H. Y. Izan & Roslinda Lim, 2006. "Australian On-Market Buy-backs: An Examination of Valuation Issues," Multinational Finance Journal, Multinational Finance Journal, vol. 10(1-2), pages 43-79, March-Jun.

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