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Stock Repurchase Announcements And Stock Prices Evidence From Taiwan

Author

Listed:
  • Li-Hua, Lin
  • Szu-Hsien Lin
  • Ya-Chiu Angela Liu

Abstract

This paper uses an event study methodology to examine the stock price behavior surrounding announcements of stock repurchases made by Taiwan firms from 2000 to 2008. Our analysis shows that stock prices go up in response to stock repurchase announcements. We also find the announcement effects between various industries to be significantly different; the announcement effect is greatest in the financial industry and least in the electronics industry. Finally, firms which fully executed stock repurchases were confirmed to have experienced a relatively large stock price decline in the pre-announcement period compared with those which executed less than 10% stock repurchases; however, there is no significant difference in their announcement effects.

Suggested Citation

  • Li-Hua, Lin & Szu-Hsien Lin & Ya-Chiu Angela Liu, 2011. "Stock Repurchase Announcements And Stock Prices Evidence From Taiwan," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 5(1), pages 1-12.
    • Handle: RePEc:ibf:ijbfre:v:5:y:2011:i:1:p:1-12
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    References listed on IDEAS

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    1. Hatakeda, Takashi & Isagawa, Nobuyuki, 2004. "Stock price behavior surrounding stock repurchase announcements: Evidence from Japan," Pacific-Basin Finance Journal, Elsevier, vol. 12(3), pages 271-290, June.
    2. Baker, H. Kent & Powell, Gary E. & Veit, E. Theodore, 2003. "Why companies use open-market repurchases: A managerial perspective," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(3), pages 483-504.
    3. Liu, Chao-Shin & Ziebart, David A, 1997. "Stock Returns and Open-Market Stock Repurchase Announcements," The Financial Review, Eastern Finance Association, vol. 32(4), pages 709-727, November.
    4. Comment, Robert & Jarrell, Gregg A, 1991. "The Relative Signalling Power of Dutch-Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases," Journal of Finance, American Finance Association, vol. 46(4), pages 1243-1271, September.
    5. Gustavo Grullon & David L. Ikenberry, 2000. "What Do We Know About Stock Repurchases?," Journal of Applied Corporate Finance, Morgan Stanley, vol. 13(1), pages 31-51, March.
    6. Zhang, Hua, 2005. "Share price performance following actual share repurchases," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1887-1901, July.
    7. Lie, Erik, 2000. "Excess Funds and Agency Problems: An Empirical Study of Incremental Cash Disbursements," The Review of Financial Studies, Society for Financial Studies, vol. 13(1), pages 219-247.
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    Cited by:

    1. L.W. Makasi & J. W. Kruger, 2013. "Share Repurchases Announcement Effect On Earnings: Evidence From South Africa," Accounting & Taxation, The Institute for Business and Finance Research, vol. 5(1), pages 41-46.

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    More about this item

    Keywords

    Stock repurchases; event study; abnormal return; cumulative abnormal return;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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