| Summary: | 碩士 === 長榮大學 === 經營管理研究所 === 93 === Similar to the findings in earlier literature, this study shows that stock prices fall down before repurchase announcement and rise up in response to open market repurchase announcements. This is known as the signaling hypothesis for open market repurchases. This paper also reports that the Taiwan stock market reacts more favorably to share repurchase announcements made by smaller-size firms, larger book value to market value ratio firms, and firms that announcing large percentage of repurchase programs.
In many event studies, there is an assumption that market reaction to news is mostly completed over short time periods. But Ikenberry, Lakonishok and Vermaelen（1995）hypothesize that the market treats repurchases announcement with skepticism, leading prices to adjust slowly over time. They argue that, in general, mispricing of long-term assets can take a longer time to correct since it takes longer time for fundamental uncertainty to be resolved. Shleifer and Vishny（1990）also provide reasons to explain why misprising for long-term assets can take a long time to correct, such as larger cost and higher risk of long-term assets arbitrage. All of these reasons lead to take a longer time to correct the mispricing of long-term asset such as stock, after share repurchase announcement.
Beside the positive announcement effect, this paper also provides additional evidence to the long-run stock abnormal returns after share repurchase announcement. Over the three years large abnormal returns following buyback announcements are observed. Our findings indicate that, similar to Ikenberry, Lakonishok and Vermaelen′s finding, the book / market ratio is the strongest variable related to long-run performance.
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