The Impact of Share Repurchase Announcements on Firm''s Rivals, Suppliers, and Customers

• Main Authors: Wei-yi Hou, 侯威宜
• Other Authors: Kuan-Nan Chou
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/82608494454976637366

碩士 === 國立中央大學 === 財務金融研究所 === 97 === We investigate the market reaction of the share repurchase announcements to firm’s rivals, customers, and suppliers from 1997 to 2007. The rivals and supply chain we identified is according to the benchmark input-output accounts and the data set is used to examine the market reaction during the announcement period. During different periods, all reactions we get are significantly negative. The subsample further indicates that competitive effect dominates contagion effect. Furthermore, we find both the positive and negative reaction could spread out to their supply chain. Under the two hypotheses: Information signaling and Free cash flow. We get results that the announcement will signal industry-wide negative information so that the rivals and customers will be negatively affected. And further we find that the concentration degree of the repurchasing industry will positively affect the rivals’ reaction. Therefore, we support the Free cash flow hypothesis. In addition, the customer’s reaction could be explained by both the concentration degree of the repurchasing and the customer industry. For supplier’s reaction, only the concentration of the supplier industry could explain.