Anomalous price behaviour around stock repurchases on the Taiwan stock exchange

Abstract

This study examines the impact of stock repurchases on a repurchasing firm's stock returns on the Taiwan Stock Exchange (TWSE). It is clear that significant negative abnormal returns are observed most days prior to the announcement day and that significant positive abnormal returns are detected on the announcement day and during the first few days of the post-announcement period. The total sample is further divided into various sub samples on the basis of the purpose of repurchasing, the industrial sector, firm size and the size of the repurchase. On account of the feature of industrial development in the last ten years in Taiwan, the peculiar finding is that the book-to-market ratio, which has been used to partition the repurchasing sample in the USA and Canada in previous studies, may be more appropriately substituted by the industrial sector. This finding indicates that the stock repurchase announcements of financial firms or conventional firms generate a greater impact on stock returns than do electronics firms.

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