Open Market Share Repurchases in Germany: A Conditional Event Study Approach


Andres, Christian ; Betzer, André ; Doumet, Markus ; Theissen, Erik



URL: http://elpub.bib.uni-wuppertal.de/edocs/dokumente/...
Additional URL: http://dx.doi.org/10.2139/ssrn.2467543
Document Type: Working paper
Year of publication: 2014
The title of a journal, publication series: Schumpeter discussion papers
Volume: 14-010
Place of publication: Wuppertal
ISSN: 1867-5352
Publication language: English
Institution: Business School > ABWL u. Finanzierung (Theissen)
Subject: 330 Economics
Abstract: We analyze the decision to announce an open market share repurchase and the share price reaction to the announcement. We use a conditional estimation approach which takes into account that the repurchase decision is made rationally and that, consequently, there is a potential selection bias. This approach requires a "non-event sample" of firms that could reasonably be expected to announce a repurchase but did not. The specific institutional rules for share repurchases in Germany allow us to construct such a sample. We find that a conditional approach yields results that are qualitatively comparable but differ in detail from those obtained using a non-conditional approach. We confirm earlier findings of negative share price performance prior to the repurchase announcement and positive and significant announcement day abnormal returns. The results of our probit models are consistent with the free cash flow hypothesis and provide at least partial support for the rent extraction, signalling and capital structure hypothesis. The results of the cross-sectional regressions provide strong support for the signalling hypothesis once we control for selection bias.
Additional information: Version December 2015 s. Weitere URL

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