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Stock Repurchase and Agency Problems: New Evidence in Taiwan's Stock Market

Author

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  • Keng-Hsin Lo
  • Kehluh Wang
  • Chun-Tsen Yeh

Abstract

This paper explores stock repurchase and agency issues in an emerging market with special regulations. Using match samples, agency-related variables are investigated for pre- and postannouncement periods. Our empirical evidence demonstrates that stock repurchase is related to agency cost mitigation. Agency problems are also significantly related to the preannouncement undervaluation of stock repurchase, after controlling for the effects of growth opportunity and asymmetric information. Finally, a company with a higher ratio of expected repurchase or higher agency costs normally enjoys better market response upon announcement.

Suggested Citation

  • Keng-Hsin Lo & Kehluh Wang & Chun-Tsen Yeh, 2008. "Stock Repurchase and Agency Problems: New Evidence in Taiwan's Stock Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 44(1), pages 84-94, January.
    • Handle: RePEc:mes:emfitr:v:44:y:2008:i:1:p:84-94
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    Citations

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    Cited by:

    1. Chun-Da Chen & Alex YiHou Huang & Chih-Chun Chen, 2011. "The Effects of Abolishing a Foreign Institutional Investment Quota in Taiwan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(2), pages 74-98, March.
    2. Tsai, Pei-Ling & Hsu, Yuan-Lin & Chih, Hsiang-Hsuan & Lin, Shih-Kuei, 2022. "Theoretical and empirical analysis of options in open market share repurchases of Taiwan companies," International Review of Economics & Finance, Elsevier, vol. 81(C), pages 205-226.
    3. Chih‐Wei Wang & Jing‐Yu Peng, 2021. "The impact of internal and external factors on the relationship between information opacity and open‐market repurchases," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(3), pages 4085-4118, September.
    4. Chao, Ching-Hsiang & Huang, Chih-Jen, 2022. "Firm performance following actual share repurchases: Effects of investment crowding out and financial flexibility," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
    5. Margaret (Peg) Horan, 2012. "Are Buybacks Increasing Eps?," Accounting & Taxation, The Institute for Business and Finance Research, vol. 4(1), pages 11-24.
    6. Wang, Li-Hsun & Lin, Chu-Hsiung & Fung, Hung-Gay & Chen, Hsien-Ming, 2013. "An analysis of stock repurchase in Taiwan," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 497-513.

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