Short-Term Returns of UK Share Buyback Activity
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.
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NBER Working Papers
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