Stock Repurchase and Agency Problems: New Evidence in Taiwan's Stock Market

Keng-Hsin Lo, Kehluh Wang and Chun-Tsen Yeh

Emerging Markets Finance and Trade, 2008, vol. 44, issue 1, 84-94

Abstract: This paper explores stock repurchase and agency issues in an emerging market with special regulations. Using match samples, agency-related variables are investigated for pre- and postannouncement periods. Our empirical evidence demonstrates that stock repurchase is related to agency cost mitigation. Agency problems are also significantly related to the preannouncement undervaluation of stock repurchase, after controlling for the effects of growth opportunity and asymmetric information. Finally, a company with a higher ratio of expected repurchase or higher agency costs normally enjoys better market response upon announcement.

Keywords: agency cost; agency problem; free cash flow; managerial ownership; stock repurchase (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (6)

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