This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Information Signalling of Share Buy-Back Announcements - Recent Australian Evidence

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Samson Ekanayake () (Deakin University)
Abstract

Share buy-backs have become increasingly popular among Australian companies. One of the main aims of announcing a share buy-back by a listed company is signalling the market that its shares are currently underpriced. When market reacts to the signal, price of the shares is expected to increase immediately after the announcement. While there are several ways of buying back shares, ‘on-market buy-backs’ is the most popular method of buying back shares in Australia. Australian listed companies have announced more than two hundred on-market share buy-backs over the past three years. The aim of this paper is to examine the information signalling effects of these on-market buy-back announcements. If the signal is considered positively (negatively) by the market, the price of the repurchasing company’s shares should increase (decrease) immediately after the announcement. In this study, signalling effect of share buy-back announcements was examined using most recent Australian data. The total population of on-market buy-back announcements during the period from 1 January 2000 to 10 March 2003 was examined in this study. The abnormal market return over the short-run (announcement day and 9 trading days centred on the announcement date) was computed using the All Ordinaries Accumulation Index as the reference portfolio. The daily abnormal returns (AR) and cumulative abnormal returns (CAR) during the event period were computed. The results strongly support the information-signalling hypothesis of share buy-backs. Australian market generally considers announcement of on-market share repurchases as signalling of insider information that shares are currently underpriced.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/swp2004_16.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Accounting, Finance, Financial Planning and Insurance Series with number 2004_16.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 22 pages
Date of creation: 05 Oct 2004
Date of revision:
Handle: RePEc:dkn:acctwp:aef_2004_16

Contact details of provider:
Postal: 221 Burwood Highway, Burwood 3125
Phone: 61 3 9244 3815
Web page: http://www.deakin.edu.au/buslaw/aef/index.php

For technical questions regarding this item, or to correct its listing, contact: (Dr Xueli Tang).

Related research
Keywords: Stock repurchases; Australian share buy-backs; signalling; short-term price reaction;

References listed on IDEAS
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. Dann, Larry Y., 1981. "Common stock repurchases : An analysis of returns to bondholders and stockholders," Journal of Financial Economics, Elsevier, vol. 9(2), pages 113-138, June. [Downloadable!] (restricted)
  2. Dann, Larry Y. & DeAngelo, Harry, 1983. "Standstill agreements, privately negotiated stock repurchases, and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 275-300, April. [Downloadable!] (restricted)
  3. Barth, Mary E. & Kasznik, Ron, 1999. "Share repurchases and intangible assets," Journal of Accounting and Economics, Elsevier, vol. 28(2), pages 211-241, December. [Downloadable!] (restricted)
  4. Bradley, Michael & Wakeman, L. Macdonald, 1983. "The wealth effects of targeted share repurchases," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 301-328, April. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? Want to help out with this project? Look for volunteer opportunities.

This page was last updated on 2009-12-3.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.