The post-repurchase announcement drift: an anomaly in disguise?. Issue 2 (9th February 2015)

• Record Type: Journal Article
• Authors: H. Kent Baker, Professor; Rob Weigand, Dr; Nguyen, Thanh T.; Sutton, Ninon K.; Pham, Dung (June)
• Is Part Of: Managerial finance. Volume 41:Issue 2(2015)
• Page Start: 205
• Page End: 224
• Publication Date: 2015-02-09
• Subjects: Corporations -- Finance -- Periodicals; Business enterprises -- Finance -- Periodicals; 658.1505
• DOI: 10.1108/MF-02-2014-0038
• Languages: English
• ISSNs: 0307-4358

Abstract

<abstract> <title> <x content-type="archive" xml:space="preserve">Abstract</x> </title> <sec> <title content-type="abstract-heading">Purpose</title> <p> – The purpose of this paper is to reexamine the stock price drifts after open-market stock repurchase announcements by differentiating actual repurchases from repurchase announcements and by controlling for the repurchasing firms' earnings improvement in the announcement year relative to the prior year. </p> </sec> <sec> <title content-type="abstract-heading">Design/methodology/approach</title> <p> – The authors use the calendar-time method and matching method based on different criteria to calculate the post-announcement abnormal returns. </p> </sec> <sec> <title content-type="abstract-heading">Findings</title> <p> – The results show that only firms actually repurchasing their shares exhibit a positive post-announcement drift. More importantly, the authors find that these repurchasing firms have the same post-announcement drift as their matching firms that have similar size and earnings performance but do not repurchase. This supports the argument that the post-repurchase announcement drift found in previous studies is not a distinct anomaly but the post-earnings announcement drift in disguise. </p> </sec> <sec> <title content-type="abstract-heading">Social implications</title> <p> – The post-repurchase announcement drift found in previous studies is the post-earnings announcement drift in disguise. </p> </sec> <sec> <title content-type="abstract-heading">Originality/value</title> <p> – The study shows that because high earnings performance positively relates to real repurchase activities, controlling for earnings performance in examining whether a drift occurs after repurchase announcements.</p> </sec> </abstract>