Sodhi, Adhiraj ORCID: 0000-0002-5689-933X , Mateus, Cesario, Mateus, Irina and Stojanovic, Aleksandar (2023) The market reaction to repurchase announcements. Journal of Risk and Financial Management, 16 (443). pp. 1-27. ISSN 1911-8066 (Print), 1911-8074 (Online) (doi:https://doi.org/10.3390/jrfm16100443)

Preview

PDF (Publisher VoR) 44439_SODHI_The_Market_Reaction_to_Repurchase_Announcements.pdf - Published Version Available under License Creative Commons Attribution. Download (665kB) | Preview

Abstract

This paper investigates the drivers of the market’s reaction to share repurchase announcements in the UK and the related abnormality in stock performance. It uniquely captures the impact of globalisation in tandem with a variety of firm-level and macro-level determinants. We undertake multivariate OLS regression to test the determinants of the market’s reaction and find a negative influence when repurchases are tax-friendlier than dividends if there is high debt exposure and economic globalisation is rising, with a positive influence when the company has a history of distributing above average dividends. To quantify the short-term price abnormality, we employ event study analysis, and the findings compute positive (insignificant) stock price abnormality for nonfinancial (financial) firms. For long-term stock price abnormality, we compare against the FTSE 100 by computing annual geometric stock performances. The findings indicate a negative (insignificant) stock price abnormality for nonfinancial (financial) firms. The results can aid corporate management in improving repurchase timing, aid in the decision making of financial practitioners when trading or investing in repurchasing firms, and assist policymakers in mapping more efficient fiscal and cross-market trade frameworks.

Item Type:	Article
Additional Information:	This article belongs to the Special Issue Advances in Corporate Finance and Investments.
Uncontrolled Keywords:	repurchases; reaction; abnormal returns
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management H Social Sciences > HF Commerce
Faculty / School / Research Centre / Research Group:	Faculty of Business
Last Modified:	13 Oct 2023 08:04
URI:	http://gala.gre.ac.uk/id/eprint/44439

Actions (login required)

View Item

Downloads