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Short-Term Returns of UK Share Buyback Activity

Author

Listed:
  • Carol Padgett

    (ICMA Centre, University of Reading)

  • Zhiqi Wang

    (ICMA Centre, University of Reading)

Abstract

This paper examines the short-term signalling power of UK open market share repurchases between 1999 and 2004. The 5-day and 11-day abnormal returns centred on the announcement date are statistically significant at 1.13% and 1.21% respectively. However, there is no evidence to support any relationship between the 5-day announcement abnormal returns and characteristics of UK share repurchases, such as the percentage of shares to be repurchased, pre-announcement return, size and lag time. These results are largely in line with results reported by Rees (1996). It seems that UK share repurchases are not primarily motivated by share undervaluation. That is why the signalling hypothesis fails to explain the announcement abnormal returns of the UK open market share repurchases.

Suggested Citation

  • 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, University of Reading.
    • Handle: RePEc:rdg:icmadp:icma-dp2007-10
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    File URL: http://www.icmacentre.ac.uk/files/pdf/dps/dp_200710.pdf
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    References listed on IDEAS

    as
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    3. 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.
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    Cited by:

    1. 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.
    2. Reddy, Kotapati Srinivasa & Nangia, Vinay Kumar & Agrawal, Rajat, 2013. "Share repurchases, signaling effect and implications for corporate governance: Evidence from India," MPRA Paper 60147, University Library of Munich, Germany.

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    More about this item

    Keywords

    UK share repurchases; signalling hypothesis; share undervaluation; announcement abnormal returns;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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