What Drives the Declining Wealth Effect of Subsequent Share Repurchase Announcements?

26 Pages Posted: 27 Dec 2017 Last revised: 11 Mar 2018

See all articles by David K. Ding

David K. Ding

Singapore Management University - Lee Kong Chian School of Business; Massey University - School of Economics and Finance

Hardjo Koerniadi

Auckland University of Technology

Chandrasekhar Krishnamurti

University of South Australia

Date Written: December 22, 2017

Abstract

Recent academic studies document that open market share repurchase announcement period returns are much lower than those reported in early studies. This study finds that the lower announcement returns are attributed to repeat announcements that dominate the sample in the recent period. The announcement period return of the initial repurchase program launched by a repeat repurchasing firm on average is positive. However, the more this firm repeats its repurchase announcement, the lower its announcement period abnormal returns. Further tests reveal that firms with negative past repurchase announcement returns are more likely to repeat their repurchase programs, which result in lower announcement returns. Our results are consistent with overconfident managers drive the lower repurchase announcement returns.

Keywords: share repurchases, self-attribution, overconfidence

JEL Classification: G14, G30, G35

Suggested Citation

Ding, David K. and Koerniadi, Hardjo and Krishnamurti, Chandrasekhar, What Drives the Declining Wealth Effect of Subsequent Share Repurchase Announcements? (December 22, 2017). Available at SSRN: https://ssrn.com/abstract=3092384 or http://dx.doi.org/10.2139/ssrn.3092384

David K. Ding

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

50 Stamford Road
Singapore, 178899
Singapore
+65 6828-0245 (Phone)

Massey University - School of Economics and Finance ( email )

Auckland
New Zealand

Hardjo Koerniadi (Contact Author)

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

Chandrasekhar Krishnamurti

University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia

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