An Empirical Study on the Effects and Motives of Stocks Repurchase Announcement by TSE Listed Companies.
Date Issued
2006
Date
2006
Author(s)
Wu, Pei-Fen
DOI
zh-TW
Abstract
This paper examines the effects and motives of Taiwan Stock Exchange listed companies that announced stock repurchases. The stock repurchases system has carried out since 9th of August in 2000 in Taiwan. To avoid the influence of Asian financial meltdown and local financial crisis, we use samples from January 2003 to December 2005.
The results show that there are short-run positive effects when companies announce to repurchase their stocks. The average prices of repurchase stocks and the book-to-market ratios of companies are positively related to companies’ cumulative abnormal returns. The performances of past stock prices are negatively related to companies’ cumulative abnormal returns. The information asymmetry phenomenon can be mitigated, so the results support the information or signaling hypothesis.
Furthermore, we find that the cash flow proper ratios are positively related to companies’ cumulative abnormal returns, so we support the free cash flow hypothesis. However, insider-stock-hold ratios and insider-stock-mortgage ratios of companies are not significantly related to companies’ cumulative abnormal returns. In another aspect, we find that when companies announce to repurchase their stocks, the investors will revaluate their past accounting information.
Subjects
庫藏股買回
宣告效果
宣告買回動機
stock repurchases
the effects/motives of announcement
the information or signaling hypothesis
Type
other