Open market share repurchases in Germany: A conditional event study approach
We analyze the decision to announce an open market share repurchase and the share price reaction to the announcement. We use a conditional estimation approach which takes into account that the repurchase decision is made rationally and that, consequently, there is a potential selection bias. This approach requires a 'non-event sample' of firms that could reasonably be expected to announce a repurchase but did not. The specific institutional rules for share repurchases in Germany allow us to construct such a sample. We find that a conditional approach yields results that are qualitatively comparable but differ in detail from those obtained using a non-conditional approach. We confirm earlier findings of negative share price performance prior to the repurchase announcement and positive and significant announcement day abnormal returns. The results of our probit models are consistent with the free cash ow hypothesis and provide at least partial support for the rent extraction, signalling and capital structure hypothesis. The results of the cross-sectional regressions provide strong support for the signalling hypothesis once we control for selection bias.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 0221 / 470 5607
Fax: 0221 / 470 5179
Web page: http://cfr-cologne.de/english/version06/html/home.php
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alon Brav & John R. Graham & Campbell R. Harvey & Roni Michaely, 2003.
"Payout Policy in the 21st Century,"
NBER Working Papers
9657, National Bureau of Economic Research, Inc.
- Christine Jolls, 1998. "Stock Repurchases and Incentive Compensation," NBER Working Papers 6467, National Bureau of Economic Research, Inc.
- La Porta, Rafael & Lopez-de-Silanes, Florencio & Schleifer, Andrei & Vishny, Robert, 2001.
"Investor Protection and Corporate Governance,"
Working Paper Series
rwp01-017, Harvard University, John F. Kennedy School of Government.
- Correia da Silva, Luis & Goergen, Marc & Renneboog, Luc, 2004. "Dividend Policy and Corporate Governance," OUP Catalogue, Oxford University Press, number 9780199259304, March.
- Clifford P. Stephens & Michael S. Weisbach, 1998. "Actual Share Reacquisitions in Open-Market Repurchase Programs," Journal of Finance, American Finance Association, vol. 53(1), pages 313-333, 02.
- Hovakimian, Armen & Opler, Tim & Titman, Sheridan, 2001. "The Debt-Equity Choice," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(01), pages 1-24, March.
- Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March.
- Andreas Hackethal & Alexandre Zdantchouk, 2006. "Signaling Power of Open Market Share Repurchases in Germany," Financial Markets and Portfolio Management, Springer, vol. 20(2), pages 123-151, June.
- Gugler, Klaus & Yurtoglu, B. Burcin, 2003. "Corporate governance and dividend pay-out policy in Germany," European Economic Review, Elsevier, vol. 47(4), pages 731-758, August.
- von Eije, Henk & Megginson, William L., 2008. "Dividends and share repurchases in the European Union," Journal of Financial Economics, Elsevier, vol. 89(2), pages 347-374, August.
- Andriosopoulos, Dimitris & Hoque, Hafiz, 2013. "The determinants of share repurchases in Europe," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 65-76.
- Boehmer, Ekkehart & Masumeci, Jim & Poulsen, Annette B., 1991. "Event-study methodology under conditions of event-induced variance," Journal of Financial Economics, Elsevier, vol. 30(2), pages 253-272, December.
- Acharya, Sankarshan, 1988. " A Generalized Econometric Model and Tests of a Signalling Hypothesis with Two Discrete Signals," Journal of Finance, American Finance Association, vol. 43(2), pages 413-29, June.
When requesting a correction, please mention this item's handle: RePEc:zbw:cfrwps:1302. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.