Why does the Corporation Adopt the Policy of Stock Repurchase in the Financial Tsunami of 2007-08?

• Main Authors: Jau-Jing Yu, 游佳經
• Other Authors: E-Ching Wu
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/68464224366838633616

碩士 === 靜宜大學 === 財務金融學系 === 103 === The financial tsunami in 2007-2008 not only made the global economy crash but also lead to the value of financial assets depreciate deeply, in the meanwhile, the companies listed in Taiwan security market adopted stock repurchase policy to pull up the stock price. However, the stock price underperformed is normal by the systematic crash, why does the corporation adopt the policy of stock repurchase in the financial tsunami of 2007-08? This attracts our interest. Thus, we examine the effectiveness of stock repurchase in the financial tsunami, and analyze the reasons of stock repurchase in the financial tsunami by observing the characteristics and the usage difference among the companies adopted the stock repurchase. We employ the event study, multiple-factor market model and GARCH (Generalized Auto Regressive Conditional Heteroskedastic) method, which is better than the ordinary least squares method to estimate, to study the impact of stock repurchase in the financial tsunami on the stock price. In addition, we use the pair-t-test and Wilcoxon analysis to discover the reasons of adopting the stock repurchase in the financial tsunami. In summary, we find that the policy of stock repurchase is still effective in the financial tsunami, but the influence is much stronger than that in pre-tsunami. Second, the size of the company adopted stock repurchase in financial tsunami is smaller than the one in pre-tsunami. It indicates that the market is less efficient to pass the information to investors. Therefore, the smaller companies must adopt the policy of stock repurchase to improve the effectiveness of passing message to investors. Third, the reason of stock repurchase in financial tsunami is different from that in pre-tsunami. The main purpose of stock repurchase is to write-off stock to enhance the value of stock in pre-tsunami while retaining the talent employees in the financial tsunami. Finally, we examine whether the company adopts stock repurchase in the financial tsunami by the chance of the stock deeply undervalued to earn excess profit, as a result, the company doesn’t do that.