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The market valuation of share repurchases in Europe

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  • Andriosopoulos, Dimitris
  • Lasfer, Meziane

Abstract

We analyze a uniquely constructed data set of open market share repurchases across a sample of European firms. We find that the announcement date market reaction is lower than that in the US, mainly because of (i) the relatively large number of recurring announcements which generate significantly lower returns than the initial announcements of intention to repurchase shares; (ii) the rather low market reaction in France, due probably to specific governance and corporate cultural issues; and (iii) the regulatory reform that allowed UK firms to keep the repurchased shares as treasury stock, which decreased their market impact. Across our countries, taxation, shareholder protection, and the European Union’s Market Abuse Directive do not affect significantly the market valuation of repurchases. Our results imply that ultimately, domestic institutional specificities and reforms play significant roles in the market valuation and popularity of share repurchases.

Suggested Citation

  • Andriosopoulos, Dimitris & Lasfer, Meziane, 2015. "The market valuation of share repurchases in Europe," Journal of Banking & Finance, Elsevier, vol. 55(C), pages 327-339.
    • Handle: RePEc:eee:jbfina:v:55:y:2015:i:c:p:327-339
    DOI: 10.1016/j.jbankfin.2014.04.017
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    More about this item

    Keywords

    Share repurchases; Recurring announcements; Investor protection; Taxation; Signaling undervaluation; Market Abuse Directive (MAD); Regulatory treatment of share repurchases;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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