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Share repurchase: Does it increase the informativeness of market prices?

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  • Hubert de La Bruslerie

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

Share repurchases are transactions which are supposed to cause a market reaction through a signaling approach. However looking only at cumulated abnormal returns (CARs) is insufficient and the results are sometimes contradictory. We introduce the concept of informativeness to assess if repurchases improve the private information content of stock prices. Our empirical test comprises American and European buybacks in the period 1990-2011. We use the synchronicity measure introduced by Roll (1988) to follow the change in informativeness before and after the announcement of a transaction. The determinants of informativeness and CARs are also investigated. Our results are negative: Informativeness does not systematically improve, but may sometimes if a change of dividend policy jointly occurs.

Suggested Citation

  • Hubert de La Bruslerie, 2013. "Share repurchase: Does it increase the informativeness of market prices?," Post-Print halshs-00937565, HAL.
    • Handle: RePEc:hal:journl:halshs-00937565
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00937565v1
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    References listed on IDEAS

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    Cited by:

    1. Elzbieta Wronska-Bukalska, 2014. "Information Content, Signalling Hypothesis and Share Repurchase Programs in Poland," Management, University of Primorska, Faculty of Management Koper, vol. 9(3), pages 173-185.

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