Share buy-backs in Germany overreaction to weak signals?

This paper investigates the magnitude and the main determinants of share price reactions to buy-back announcements of German corporations. For our comprehensive sample of 224 announcements that took place between May 199
This paper investigates the magnitude and the main determinants of share price reactions to buy-back announcements of German corporations. For our comprehensive sample of 224 announcements that took place between May 1998 and April 2003 we find average cumulative abnormal returns around -7.5% for the thirty days preceding the announcement and around +7.0 % for the ten days following the announcement. We regress post-announcement abnormal returns with multiple firm characteristics and provide evidence which supports the undervaluation signaling hypothesis but not the excess cash hypothesis or the tax-efficiency hypothesis. In extending prior empirical work, we also analyze price effects from initial statements of firms that they intend to seek shareholder approval for a buy-back plan. Observed cumulative abnormal returns on this initial date are in excess of 5% implying a total average price effect between 12% and 15% from implementing a buy-back plan. We conjecture that the German regulatory environment is the main reason why market variations to buy-back announcements are much stronger in Germany than in other countries and conclude that initial statements by managers to seek shareholders’ approval for a buy-back plan should also be subject to legal ad-hoc disclosure requirements.
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Metadaten
Author:Andreas Hackethal, Alexandre Zdantchouk
URN:urn:nbn:de:hebis:30-5894
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (128)
Document Type:Working Paper
Language:English
Date of Publication (online):2005/04/11
Year of first Publication:2004
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2005/04/11
SWD-Keyword:Aktienrückkauf / Ankündigungseffekt / Börsenkurs / Kapitalertrag / Publizitätspflicht / Schätzung / Deutschland
Source:Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting ; 128, Version April 2004, First Verion: Dezember 2002
HeBIS PPN:128736151
Institutes:Wirtschaftswissenschaften
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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