Incomplete Share Repurchase Programs in Vietnam: Completion Rates and Short-Term Returns
Kien Cao,
Thuy Nguyen,
Hong Nguyen and
Hien Bui
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Thuy Nguyen: Higher Education Department, Ministry of Education and Training, Hanoi 10000, Vietnam
Hong Nguyen: Faculty of Business Administration, Foreign Trade University, Hanoi 10000, Vietnam
Hien Bui: Faculty of Business Administration, Foreign Trade University, Hanoi 10000, Vietnam
IJFS, 2020, vol. 8, issue 3, 1-16
Abstract:
Stock repurchases have become a preferred method of distributing cash to stockholders. However, given the high level of information asymmetry and weak corporate governance as well as poor investor protection in Vietnam, many Vietnamese firms use stock repurchases as a tool to manipulate stock prices in the market. Using event study methodology and Tobit regression models, this study examines the stock price behaviors surrounding the event dates and the impact of earnings management activities prior to the stock repurchases on the completion of repurchase announcements in Vietnam. The results show that earnings management practices prior to stock repurchase programs, the percentage of intended buyback shares, and CEO characteristics have a significant impact on the completion of these repurchase programs. Moreover, most of the windows surrounding the event dates do not have any significant abnormal movement of the stock prices. A plausible explanation is that, due to weak corporate governance and poor investor protection, Vietnamese firms send lots of misleading signals through various corporate activities, especially stock repurchase programs. Thus, these signals have less meaning to investors.
Keywords: stock repurchase; share buyback; completion rates; market efficiency; short-term returns; CEO characteristics (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2020
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