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An analysis of stock repurchase in Taiwan

Author

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  • Wang, Li-Hsun
  • Lin, Chu-Hsiung
  • Fung, Hung-Gay
  • Chen, Hsien-Ming

Abstract

We show that the specific regulation in Taiwan requiring firms to repurchase shares explicitly to resolve the information ambiguity does not prevent market underreaction by the evidences of positive short-term and long-term abnormal return. In addition, firms that retire their buybacks show a superior long-term performance than those that reissue the buybacks. Our results show that the long-term price performance is positively related to firms' operating performance and dividend payouts in the post-repurchase period. Further analysis indicates that the market reacts asymmetrically to the changes of firms' operating performance and dividend payout level.

Suggested Citation

  • Wang, Li-Hsun & Lin, Chu-Hsiung & Fung, Hung-Gay & Chen, Hsien-Ming, 2013. "An analysis of stock repurchase in Taiwan," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 497-513.
  • Handle: RePEc:eee:reveco:v:27:y:2013:i:c:p:497-513
    DOI: 10.1016/j.iref.2013.01.007
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Chuan-Hao Hsu & Hung-Gay Fung & Yi-Ping Chang, 2016. "The performance of Taiwanese firms after a share repurchase announcement," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 1251-1269, November.
    2. Chiu, Yung-Chin & Liang, Woan-lih, 2015. "Do firms manipulate earnings before accelerated share repurchases?," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 86-95.
    3. Huang, Chia-Wei & Ho, Po-Hsin & Lin, Chih-Yung & Yen, Ju-Fang, 2014. "Firm age, idiosyncratic risk, and long-run SEO underperformance," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 246-266.
    4. Chen, Yea-Mow & Huang, Ying Sophie & Wang, David K. & Wu, Chun-Chou, 2014. "Going private transactions by U.S.-Listed Chinese companies: What drives the premiums paid?," International Review of Economics & Finance, Elsevier, vol. 32(C), pages 79-91.

    More about this item

    Keywords

    Long-term price performance; Retired shares; Stock repurchases;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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