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Do Prior Financial Events to Share Repurchase Announcements Matter?

Author

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  • Jo-Yu Wang
  • Chih-Hsuan Chang
  • Juo-Lien Wang

Abstract

This study examines the effects of share repurchase announcements on Taiwanese firms after various financial practices and decisions from 2000 to 2020. First, we discuss whether there is a significant abnormal return on the price around share repurchase announcement. Furthermore, we explore whether firms take advantage of buyback announcements to signal the outsiders that the company’s stock price is undervalued. Second, we discuss whether the repurchase announcements have abnormal returns after financing or dividend distribution decisions as companies implement these decisions in response to future operating plans. Further, we explore whether there is a conflict between these funding operation policies and the repurchase announcement.  According to our results, there is an opposing effect between seasoned equity offering and share repurchase announcements. We found the effect of the announcement of share repurchase after a cash dividend is better than a stock dividend. The results also show that the effect of a share repurchase announcement after the issuance of convertible bonds is better than an ordinary corporate bond issue, especially the firms with a low market-to-book ratio. It means that convertible bonds can reduce liabilities if the investors convert the debt into equity and improve the company’s capital structure. JEL Codes: G14, G30

Suggested Citation

  • Jo-Yu Wang & Chih-Hsuan Chang & Juo-Lien Wang, 2024. "Do Prior Financial Events to Share Repurchase Announcements Matter?," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 23(2), pages 197-226, June.
    • Handle: RePEc:sae:emffin:v:23:y:2024:i:2:p:197-226
    DOI: 10.1177/09726527231202065
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    More about this item

    Keywords

    Repurchase announcement; shares buyback;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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