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 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.

Download full text files

Export metadata

  • Export Bibtex
  • Export RIS

Additional Services

    Share in Twitter Search Google Scholar
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):11.04.2005
Year of first Publication:2004
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
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 ohne Print on Demand

$Rev: 8725 $