Share repurchase: Does it increase the informativeness of market prices?
AbstractShare repurchases are transactions which are supposed to cause a market reaction through a signaling approach. However looking only at cumulated abnormal returns (CARs)is insufficient and the results are sometimes contradictory. We introduce the concept of informativeness to assess if repurchases improve the private information content of stock prices. Our empirical test comprises American and European buybacks in the period 1990 – 2011. We use the synchronicity measure introduced by Roll (1988) to follow the change in informativeness before and after the announcement of a transaction. The determinants of informativeness and CARs are also investigated. Our results are negative : Informativeness does not systematically improve, but may sometimes if a change of dividend policy jointly occurs.
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Bibliographic InfoPaper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/11381.
Date of creation: May 2013
Date of revision:
Share repurchase; buybacks; market efficiency; informativeness;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
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