Share buy-backs in Germany overreaction to weak signals? : [Version April 2004]

  • 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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Author:Andreas HackethalORCiDGND, Alexandre Zdantchouk
Parent Title (English):Universität Frankfurt am Main. Fachbereich Wirtschaftswissenschaften: [Working paper series / Finance and accounting] Working paper series, Finance & Accounting ; No. 128
Series (Serial Number):Working paper series / Johann-Wolfgang-Goethe-Universität Frankfurt am Main, Fachbereich Wirtschaftswissenschaften : Finance & Accounting (128)
Publisher:Univ., Fachbereich Wirtschaftswiss.
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2004
Year of first Publication:2004
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/04/11
Tag:Aktienrückkauf; Ankündigungseffekt; Börsenkurs; Deutschland; Kapitalertrag; Publizitätspflicht; Schätzung
GND Keyword:Deutschland; Aktienkurs; Börsenkurs; Wiederkauf
Issue:Version April 2004
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht