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The impact of open market equity repurchases on UK equity prices

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  • William Rees

Abstract

This paper presents the first empirical evidence regarding the share price impact of open market stock repurchases in the UK. The analysis reveals a positive reaction on the day of the announcement of the repurchase, consistent with the reaction found under very different circumstances in the US, and consistent with the expected reaction on the retirement of equity. The transactions are typically instigated by firms that are underperforming the market and tends to follow a short-term fall in the firm's share price. The reaction on the day of the repurchase is positively related to the percentage of equity transacted. There is no evidence that the return on the day of the announcement is affected by the characteristics of the repurchase.

Suggested Citation

  • William Rees, 1996. "The impact of open market equity repurchases on UK equity prices," The European Journal of Finance, Taylor & Francis Journals, vol. 2(4), pages 353-370.
  • Handle: RePEc:taf:eurjfi:v:2:y:1996:i:4:p:353-370
    DOI: 10.1080/13518479600000014
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    Citations

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    Cited by:

    1. Firth, Michael & Leung, T.Y. & Rui, Oliver M., 2010. "Double signals or single signal? An investigation of insider trading around share repurchases," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(4), pages 376-388, October.
    2. Chi-Chun Liu & Ni-Yun Chen, 2015. "Earnings Surprises in Analysts' Forecasts, Mandatory Disclosure, and Share Repurchases," Abacus, Accounting Foundation, University of Sydney, vol. 51(1), pages 63-85, March.
    3. Bogna Ka?mierska-Jó?wiak & Elzbieta Wro?ska-Bukalska, 2017. "Effect Of Repurchase Announcement On The Polish Alternative Stock Market," Proceedings of Economics and Finance Conferences 4807891, International Institute of Social and Economic Sciences.
    4. Carol Padgett & Zhiqi Wang, "undated". "Short-Term Returns of UK Share Buyback Activity," ICMA Centre Discussion Papers in Finance icma-dp2007-10, Henley Business School, Reading University.

    More about this item

    Keywords

    G14 information and market efficiency; event studies; G32 financing policy: capital and ownership structure;

    JEL classification:

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

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