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The Persistence of Long-Run Abnormal Stock Returns Following Stock Repurchases and Offerings

Forthcoming in Management Science

38 Pages Posted: 30 Sep 2011 Last revised: 16 Dec 2014

Fangjian Fu

Singapore Management University - Lee Kong Chian School of Business

Sheng Huang

China Europe International Business School; China Europe International Business School

Date Written: December 15, 2014

Abstract

The long-run abnormal returns following both stock repurchases and seasoned equity offerings disappear for the events in the most recent decade. The disappearance is associated with the changing market environment – increased institutional investment, decreased trading costs, improved liquidity, and enhanced regulations on corporate governance and information disclosure. In response to the changing market environment, firms become less opportunistic in stock repurchases and offerings. Recent events are motivated more for business operating reasons than to exploit mispricing. Both external market factors and internal firm factors contribute to the disappearance of the post-event abnormal returns. Our evidence on the recent events contrasts with the findings of earlier studies and sheds light on how the changing market environment affect both asset pricing and corporate behavior.

Keywords: Long-run abnormal returns, stock pricing efficiency, stock repurchases, seasoned equity offerings, feedback effect of financial markets

JEL Classification: G14, G12, G35, G32

Suggested Citation

Fu, Fangjian and Huang, Sheng, The Persistence of Long-Run Abnormal Stock Returns Following Stock Repurchases and Offerings (December 15, 2014). Forthcoming in Management Science. Available at SSRN: https://ssrn.com/abstract=1936187 or http://dx.doi.org/10.2139/ssrn.1936187

Fangjian Fu (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore, 178899
Singapore

Sheng Huang

China Europe International Business School ( email )

Buidling 20, Zhongguancun Software Park
#8, Dongbeiwang West Road
Beijing, 100193
Singapore
86-10-82966804 (Phone)
86-10-82966888 (Fax)

China Europe International Business School

Buidling 20, Zhongguancun Software Park
#8, Dongbeiwang West Road
Beijing, Beijing 100193
China

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