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Financial signaling with open market share repurchases and private redemptions

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  • Warmdt, Luca
  • Užik, Martin
  • Löcher, Markus

Abstract

Financial decisions can be used to convey information to uninformed market participants aiming to mitigate pricing inefficiencies. Corporate share repurchases are particularly interesting since they have emerged as an integral component of corporate payout policy with a global spread. The objective of this paper is to quantify the market reaction to the disclosure of buybacks that simultaneously apply open market buyback and private redemption and assess the signaling hypothesis. The results provide evidence for a positive market reaction following the announcement of this type of repurchase. In the same way the findings support the signaling hypothesis and suggest that the magnitude of the post-announcement price alteration is related to the announcement characteristics.

Suggested Citation

  • Warmdt, Luca & Užik, Martin & Löcher, Markus, 2018. "Financial signaling with open market share repurchases and private redemptions," Working Papers 93, Berlin School of Economics and Law, Institute of Management Berlin (IMB).
    • Handle: RePEc:zbw:imbwps:93
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    More about this item

    Keywords

    Share Repurchase; Buyback; Open Market Repurchase; Signaling; Valuation;
    All these keywords.

    JEL classification:

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

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