Download or read book Market Underreaction to Open Market Share Repurchases written by David Ikenberry and published by . This book was released on 1994 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine long-run firm performance following open market share repurchase announcements which occurred during the period 1980 to 1990. We find that the average abnormal four-year buy-and-hold return measured after the initial announcement is 12.1 percent. For `value' stocks, companies more likely to be repurchasing shares because of undervaluation, the average abnormal return is 45.3 percent. For repurchases announced by `glamour' stocks where undervaluation is less likely to be an important motive, no positive drift in abnormal returns is observed. Thus, at least with respect to value stocks, the market errs in its initial response and appears to ignore much of the information conveyed through repurchase announcements.
Download or read book Market Underreaction to Open Market Share Repurchases written by David L. Ikenberry and published by . This book was released on 2010 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine long-run firm performance following open market share repurchase announcements which occurred during the period 1980 to 1990. We find that the average abnormal four-year buy-and-hold return measured after the initial announcement is 12.1 percent. For `value' stocks, companies more likely to be repurchasing shares because of undervaluation, the average abnormal return is 45.3 percent. For repurchases announced by `glamour' stocks where undervaluation is less likely to be an important motive, no positive drift in abnormal returns is observed. Thus, at least with respect to value stocks, the market errs in its initial response and appears to ignore much of the information conveyed through repurchase announcements.
Download or read book False Signals from Stock Repurchase Announcements written by De-Wai Chou and published by . This book was released on 2004 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the possibility of false signaling by firms announcing open-market stock repurchases. We examine a sample of 281 open-market share repurchases, with the self-styled reason of undervaluation, by firms between 1993 and 1998. Our results showed no evidence of an upward revision in the earnings forecasts of analysts following open-market share repurchase announcements, finding instead, small negative surprise revisions, which contradicts the prevailing empirical evidence. Moreover, we found that surrounding share repurchase announcements, managers manipulated discretionary accruals upward. We posit that this action, on the part of management, is to persuade market participants that the equity of their firm is undervalued. We also found no evidence of the market underreaction phenomenon but did observe negative abnormal returns in the 3- to 12-month period subsequent to the announcement. Overall, our results confirm that with a weaker signaling power, open-market share repurchase programs have been used to send a false signal to the marketplace, by emphasizing an undervalued equity.
Download or read book Share Repurchases written by Theo Vermaelen and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: This survey derives some of the key results on the taxation of international investment in variants of one model of multinational investment.
Download or read book Corporate Payout Policy written by Harry DeAngelo and published by Now Publishers Inc. This book was released on 2009 with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Payout Policy synthesizes the academic research on payout policy and explains "how much, when, and how". That is (i) the overall value of payouts over the life of the enterprise, (ii) the time profile of a firm's payouts across periods, and (iii) the form of those payouts. The authors conclude that today's theory does a good job of explaining the general features of corporate payout policies, but some important gaps remain. So while our emphasis is to clarify "what we know" about payout policy, the authors also identify a number of interesting unresolved questions for future research. Corporate Payout Policy discusses potential influences on corporate payout policy including managerial use of payouts to signal future earnings to outside investors, individuals' behavioral biases that lead to sentiment-based demands for distributions, the desire of large block stockholders to maintain corporate control, and personal tax incentives to defer payouts. The authors highlight four important "carry-away" points: the literature's focus on whether repurchases will (or should) drive out dividends is misplaced because it implicitly assumes that a single payout vehicle is optimal; extant empirical evidence is strongly incompatible with the notion that the primary purpose of dividends is to signal managers' views of future earnings to outside investors; over-confidence on the part of managers is potentially a first-order determinant of payout policy because it induces them to over-retain resources to invest in dubious projects and so behavioral biases may, in fact, turn out to be more important than agency costs in explaining why investors pressure firms to accelerate payouts; the influence of controlling stockholders on payout policy --- particularly in non-U.S. firms, where controlling stockholders are common --- is a promising area for future research. Corporate Payout Policy is required reading for both researchers and practitioners interested in understanding this central topic in corporate finance and governance.
Download or read book The Credibility of Open Market Share Repurchase Signaling written by Ilona Babenko and published by . This book was released on 2013 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: Open market share repurchase announcements are commonly associated with equity undervaluation, but their signal about firm value can often be misleading. We conjecture that executives who buy shares of their firm before an announcement add credibility to the undervaluation signal. Consistent with this hypothesis, we find that announcement returns are positively related to past insider purchases, especially for firms that are priced less efficiently. Firms whose insiders bought more shares are also more likely to complete their repurchase plans. Finally, we find that insider purchases predict post-announcement stock returns.
Download or read book The Debt equity Choice written by Ronald W. Masulis and published by . This book was released on 1988 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Payout Policy written by and published by . This book was released on 2007 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividend policy continues to be among the premier unsolved puzzles in finance. A number of theories have been advanced to explain dividend policy. This e-book briefly reviews the principal theories of payout policy and dividend policy and summarizes the empirical evidence on these theories. Empirical evidence is equivocal and the search for new explanation for dividends continues.
Download or read book Informed Trading and False Signaling with Open Market Repurchases written by Jesse M. Fried and published by . This book was released on 2014 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: Public companies in the United States and elsewhere increasingly use open market stock buybacks, rather than dividends, to distribute cash to shareholders. Academic commentators have emphasized the possible benefits of such repurchases for shareholders. However, little attention has been paid to their potential drawbacks. This Article shows that managers use open market repurchases to indirectly buy stock for themselves at a bargain price. Managers also boost stock prices by announcing repurchase programs they do not intend to execute, enabling them to unload their own shares at a higher price. Such bargain repurchases and inflated-price sales systematically transfer significant amounts of value from public investors to managers, as well as distort managers' payout decisions. The Article concludes by proposing a new approach to regulating open market repurchases: requiring firms to disclose specific details of their buy orders in advance. This pre-repurchase disclosure rule, the Article shows, would undermine managers' ability to use repurchases for informed trading and false signaling, thereby reducing the resulting distortions and costs to shareholders. Moreoever, it would achieve these objectives without eroding any of the potential benefits of repurchases.
Download or read book An Analysis of Repurchase Behavior in Open Market Stock Buyback Programs written by Tony Altobelli and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Boards of directors authorize billions of dollars in open market (OM) stock buybacks each year, but little is known about how many shares are actually repurchased. This paper analyses the repurchase behavior of firms that announce OM buyback programs. We find that OM announcements are credible signals. On average, firms repurchase more shares than originally authorized over the four quarters following the announcement, though there is considerable variation across firms. We examine the factors influencing repurchase behavior, and find that repurchases in a given quarter are associated with a number of variables, including past and current returns, profitability, and prior repurchase activity. We also investigate how shares outstanding change following OM program announcements. Firms in our sample actively issue shares over the test period so that the average decrease in shares outstanding is only about 20% of the number repurchased. For the most part, changes in shares are influenced by the same factors affecting repurchases and in the predicted direction.
Download or read book The Impact of Open Market Share Repurchases on Volatility and Liquidity written by Jaemin Kim and published by . This book was released on 2001 with total page 222 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Open Market Repurchase Announcements Actual Repurchases and Stock Price Behavior in Inefficient Markets written by Nobuyuki Isagawa and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I ask why a firm would choose to buy back its outstanding shares after the stock price goes up in response to an open-market repurchase announcement. I introduce the subject of market inefficiency and establish a signaling equilibrium that does not assume that an announcement of open-market repurchase represents a commitment. Since the firm can earn capital gains by buying its outstanding shares at a bargain price, it has a strong incentive to execute stock repurchases even after it announces repurchase intention. Empirically, my model predicts positive long-run stock return performance and positive announcement effects following open-market repurchase announcements.
Download or read book Signaling Power of Open Market Share Repurchases in Germany written by Andreas Hackethal and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Market Reaction to Open market Stock Repurchase Announcements written by Titos E. Ritsatos and published by . This book was released on 1999 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Announcement effects of share repurchases in India Abnormal returns or information asymmetry written by Jonas Wirth and published by GRIN Verlag. This book was released on 2023-06-05 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2022 in the subject Economics - Finance, grade: 1.0, University of Passau, language: English, abstract: In this paper, market-based and firm-specific determinants are introduced to measure their association with abnormal returns around the announcement of a share buyback conducted through tender and open market offers in India. To test the valuation effect of market-based variables: uncertainty, which is determined by implied market volatility and economic policy uncertainty. Liquidity risk, which is investigated through two illiquidity proxies and the impact of the monetary environment, represented by the three-month Mumbai Interbank Offer Rate (MIBOR) and the gold price are included. In addition, the main firm-specific hypotheses are tested to identify potential key drivers. The valuation effects examined cover the period from April 1, 2011, to March 31, 2021, during which a total of 359 share repurchases were made, 231 through tender offer and the remaining 128 through the open market. Beside separating the two buyback methods, I examine different categories in addition to the full sample to determine whether market participants' reaction to share repurchase announcements leads to abnormal returns. The rest of the paper is organized as follows. Next section provides an overview about the regulatory framework of share buyback in India. Section 3 states a brief overview about the share repurchase literature with reference to uncertainty and liquidity in global context and firm-specific literature in Indian context. Then the hypotheses are stated. Sections 5 and 6 present the methodology and data, and section 7 presents the empirical results. Section 8 provides concluding remarks.
Download or read book Good News and Bad News about Share Repurchases written by George W. Fenn and published by . This book was released on 1998 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Two Essays on Stock Repurchases The Post Repurchase Announcement Drift written by Thanh Thiet Nguyen and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We reexamine the stock price drifts following open-market stock repurchase announcements by differentiating actual repurchases from repurchase announcements and by controlling for the repurchasing firms' earnings improvement in the announcement year relative to the prior year. Our results show that only firms that actually repurchase their shares exhibit a positive post-announcement drift. More importantly, we find that these repurchasing firms have the same post-announcement drift as their matching firms that have similar size and earnings performance but do not repurchase. Further analysis indicates that the post-repurchase announcement drift is not a distinct anomaly but the well-documented post-earnings announcement drift in disguise. In addition, previous studies suggest that the market perceives IPOs as bad news (i.e., competitive threats) to existing firms in the same industry. At the same time, the market has a tendency to be overly optimistic about IPO prospects, especially during hot IPO markets. Thus, the negative industry rival reaction could be the result of investors' over-optimism toward the IPOs' growth prospects and underestimation of the competitive positions of industry rivals. Our findings show that rival firms use repurchases as a means to signal their firm quality, as well as to correct the market's overreaction to the bad news. These IPO-induced repurchases are stronger when the rival firms are in a concentrated industry and experienced poor stock performance in the previous year.
