Credibility of Corporate Announcements and Market Reaction: Evidence from Canadian Share Repurchase Programs

54 Pages Posted: 20 Mar 2007 Last revised: 25 Nov 2010

See all articles by Dev R. Mishra

Dev R. Mishra

University of Saskatchewan - Edwards School of Business

Marie D. Racine

University of Saskatchewan - Edwards School of Business

Luke Schmidt

University of Saskatchewan

Date Written: March 1, 2009

Abstract

Do market participants evaluate the credibility of a firm's share repurchase announcement based on the firm's share repurchase history? Using a sample of 1,507 share repurchase programs for firms listed on the Toronto Stock Exchange from 1994 to 2005, we find that 69% of firms fail to acquire the target number of shares specified at announcement and many firms fail to repurchase any shares. We develop credibility indices and find a positive relationship between current announcement abnormal returns and completion credibility of previous announcements. We conclude that the market prices completion credibility of past share repurchase announcements in reacting to current repurchase announcements.

Keywords: Share Repurchases, Event Study, Payout Policy, Credibility, Market Reaction

JEL Classification: G1, G35

Suggested Citation

Mishra, Dev R. and Racine, Marie D. and Schmidt, Luke, Credibility of Corporate Announcements and Market Reaction: Evidence from Canadian Share Repurchase Programs (March 1, 2009). Available at SSRN: https://ssrn.com/abstract=972632 or http://dx.doi.org/10.2139/ssrn.972632

Dev R. Mishra (Contact Author)

University of Saskatchewan - Edwards School of Business ( email )

Edwards School of Business
Saskatoon, Saskatchewan S7N 5A7
Canada
306-966-8457 (Phone)
306-966-2515 (Fax)

Marie D. Racine

University of Saskatchewan - Edwards School of Business ( email )

Saskatoon, Saskatchewan S7N 5A7
Canada

Luke Schmidt

University of Saskatchewan ( email )

College of Education
Saskatoon, Saskatchewan S7N 5A7
Canada

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