Ownership Structure and Open Market Stock Repurchases in France

Abstract

This paper examines open market stock repurchases in France. We find a positive average market reaction to the repurchase announcement. However, the magnitude of the price reaction is found to depend on a number of corporate governance structure measures. The positive aspects of the announcement only appear for a company with a low likelihood of being taken over, and with a low risk of minority shareholder expropriation. Specifically, stock repurchase programs are good news when the firm is supported by foreign institutional investors, and in the case of controlled firms, when the firm has a second large shareholder, which guarantees an effective balance of power for the controlling shareholders.

Keywords: open market share repurchases, undervaluation, ownership structure

JEL Classification: G32, G35