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Anomalous price behaviour around stock repurchases on the Taiwan stock exchange

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Author Info
Tung Liang Liao
Mei-Chu Ke
Hsiang-Tai Yu
Abstract

This study examines the impact of stock repurchases on a repurchasing firm's stock returns on the Taiwan Stock Exchange (TWSE). It is clear that significant negative abnormal returns are observed most days prior to the announcement day and that significant positive abnormal returns are detected on the announcement day and during the first few days of the post-announcement period. The total sample is further divided into various sub samples on the basis of the purpose of repurchasing, the industrial sector, firm size and the size of the repurchase. On account of the feature of industrial development in the last ten years in Taiwan, the peculiar finding is that the book-to-market ratio, which has been used to partition the repurchasing sample in the USA and Canada in previous studies, may be more appropriately substituted by the industrial sector. This finding indicates that the stock repurchase announcements of financial firms or conventional firms generate a greater impact on stock returns than do electronics firms.

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Article provided by Taylor and Francis Journals in its journal Applied Economics Letters.

Volume (Year): 12 (2005)
Issue (Month): 1 (January)
Pages: 29-39
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Handle: RePEc:taf:apeclt:v:12:y:2005:i:1:p:29-39

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59. [Downloadable!] (restricted)
  2. David Ikenberry & Josef Lakonishok & Theo Vermaelen, 2000. "Stock Repurchases in Canada: Performance and Strategic Trading," Journal of Finance, American Finance Association, vol. 55(5), pages 2373-2397, October. [Downloadable!] (restricted)
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  3. Barry, Christopher B. & Brown, Stephen J., 1984. "Differential information and the small firm effect," Journal of Financial Economics, Elsevier, vol. 13(2), pages 283-294, June. [Downloadable!] (restricted)
  4. Chan, K C & Chen, Nai-Fu, 1991. " Structural and Return Characteristics of Small and Large Firms," Journal of Finance, American Finance Association, vol. 46(4), pages 1467-84, September. [Downloadable!] (restricted)
  5. Ikenberry, David & Lakonishok, Josef & Vermaelen, Theo, 1995. "Market underreaction to open market share repurchases," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 181-208. [Downloadable!] (restricted)
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  6. Ho, Thomas S. Y. & Michaely, Roni, 1988. "Information Quality and Market Efficiency," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(01), pages 53-70, March. [Downloadable!]
  7. Fama, Eugene F & French, Kenneth R, 1995. " Size and Book-to-Market Factors in Earnings and Returns," Journal of Finance, American Finance Association, vol. 50(1), pages 131-55, March. [Downloadable!] (restricted)
  8. Lakonishok, Josef & Vermaelen, Theo, 1990. " Anomalous Price Behavior around Repurchase Tender Offers," Journal of Finance, American Finance Association, vol. 45(2), pages 455-77, June. [Downloadable!] (restricted)
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