محتوای اطلاعات اعلان های خرید مجدد بازار آزاد در تایوان

Utilizing information disclosures of open-market repurchases in Taiwan, this paper investigates two topics. The first is the association between corresponding announcing information and market responses. The results show that intention ratio is positively correlated with two-day announcement effect and the market responses of the entire execution period. However, the positive relationship is insignificant one month after the termination of the programs. The findings also reveal that price location is significantly negative when related to market responses of the overall execution period, and that such a relationship can last longer. Second, while proxy for undervaluation is properly considered, our findings suggest that the interaction between price location and market responses resulted from a higher premium rather than undervaluation, indicating that price location sends a signal of premium.

Stock repurchase programs have become a popular and important financial method for firms in many countries to distribute corporate cash to shareholders. In a repurchase program, a firm buys back a portion of its outstanding shares in the market over a period lasting from months to years. Empirical studies provide considerable evidence of significantly positive price responses to announcements of stock repurchase programs (e.g., Comment and Jarrell, 1991, Ikenberry et al., 1995, Ikenberry et al., 2000 and Oded, 2005). One common explanation is that firms use stock repurchase announcements to convey a signal of undervaluation (e.g., Dann, 1981, Vermaelen, 1981, Comment and Jarrell, 1991, Ikenberry et al., 1995, Stephens and Weisbach, 1998 and Ikenberry et al., 2000). This is also confirmed by declarations of top managers upon announcing repurchase programs that their current stock prices are too low, making their companies attractive investments (e.g., Dann, 1983 and Baker et al., 2003).

To the best of our knowledge, one unique feature of the Taiwanese market is the specific information disclosure of OMR programs. Accessing the information disclosure required by TSEC, this paper investigates whether markets behave differently in response to the announcing variables. Several interesting results are obtained. First, the empirical results indicate that, on average, the market underreacts to OMR announcements in Taiwan, since CARs continue to be significantly positive for at least three months. Second, we find that the percentage of shares to be repurchased is positively related to announcement effect and the market responses of the entire execution period. However, the positive effect is insignificant one month after the termination of the programs. Third, price location is significantly and negatively related to market responses during the entire execution period; such effects can last one month even after the termination of the programs. We also suggest that the negative association between price location and market responses is due to higher premiums rather than undervaluation. That is, lower price location implies a higher premium and results in larger market responses. Finally, our findings reveal that the motivation for conducting an OMR program does not affect the behavior of stock prices, suggesting that the announced purpose is irrelevant.