The Buyback Anomaly on the Polish Capital Market

Abstract

A number of studies carried on the US data found positive long-term excess returns following buybacks. The aim of this paper is to verify if a similar anomaly can be observed on the Polish market. We confirm the existence of long-term abnormal returns following buybacks and excess profitability of the buyback mimicking strategy (i.e. buying stocks after repurchase announcements). We discuss potential sources and present various interpretation of our evidence. Among others, we propose an alternative behavioral hypothesis for abnormal post-buyback returns. We show circumstances under which post-buyback outperformace might be also a result of managerial biases at the time of the repurchase and later temporal market overreaction in the post-buyback period.

Keywords: buyback, stock repurchase, event study, market efficiency, corporate behavioral finance

JEL Classification: G02, G14, G32, G35