| Summary: | 碩士 === 淡江大學 === 財務金融學系碩士在職專班 === 103 === This study was conducted using the listed in the Taiwan stock market that implemented capital reduction from 2002 to 2013 as samples. The event study methodology was applied to examine the short-term impact of two types of capital reduction, namely, capital reduction by cash and capital reduction by cover accumulated deficits on the stock returns on three different event dates, namely, when the capital reduction was announced by the board, when the reduction was approved by shareholders’ meeting, and when the firm was relisted after the reduction.
The results of the study indicated that investors diametrically demonstrated opposite reactions to the two types of capital reduction, regardless of when the reduction was announced, when it was approved, or when the firm was relisted. In other words, the share prices moved in completely different directions. Investors consistently viewed capital reduction by cash as a positive signal. In contrast, they consistently viewed capital reduction by cover accumulated deficits as a negative signal. However, investors, at one time, overreacted to both types of capital decrease, which reverses at a later date once incorrect conclusions are proven false.
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