The Signaling Effect and Abnormal Returns of Open Market Share Repurchases in Poland

20 Pages Posted: 5 Dec 2012

See all articles by Tomasz Słoński

Tomasz Słoński

Uniwersytet Ekonomiczny we Wrocławiu

Bartosz Zawadzki

Uniwersytet Ekonomiczny we Wrocławiu

Date Written: June 11, 2012

Abstract

The phenomena of excessive return following stock repurchase programs are well-documented in financial literature. The majority of studies apply to well-developed markets. The aim of this paper is to scrutinize this anomaly on Polish stock exchange in order to develop general conclusions about the signaling effect of share repurchases. I find that different market regulations and corporate governance practices influence the credibility of stock repurchase programs thus influencing investor’s return.

In most cases, the announcement of share repurchase program was designed to deliver costless information about stock underpricing. and was followed by rather sluggish repurchase actions. Next, we check the credibility of open market share repurchase programs by measuring the signaling effect among groups of small, medium and large companies. This is because of the assumption, that the credibility of companies declarations improves with company size.

The article presents the results of a research conducted on share buybacks done by companies listed on WSE in years 2005-2010. The event study methodology shows, that a share buyback announcement is a positive information for the shareholders and allows to obtain statistically significant abnormal returns the first days after the announcement. The interpretation of the signal is depended on the size of the company. In the sample of the lowest market capitalization companies one cannot observe any statistically significant effect.

Keywords: share repurchase, event studies

JEL Classification: G14, G35

Suggested Citation

Słoński, Tomasz and Zawadzki, Bartosz, The Signaling Effect and Abnormal Returns of Open Market Share Repurchases in Poland (June 11, 2012). Available at SSRN: https://ssrn.com/abstract=2081991 or http://dx.doi.org/10.2139/ssrn.2081991

Tomasz Słoński (Contact Author)

Uniwersytet Ekonomiczny we Wrocławiu ( email )

Komandorska 118/120
Wroclaw, 53-345
Poland

Bartosz Zawadzki

Uniwersytet Ekonomiczny we Wrocławiu ( email )

Komandorska 118/120
Wroclaw, 53-345
Poland

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