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Information Content of Share Repurchase Programs

Elzbieta Wronska
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Elzbieta Wronska: Maria Curie-Sklodowska University in Lublin, Poland

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Abstract: The article aims to present the meaning of the share repurchase programs and to identify the reasons of share repurchase made by companies. The reasons of share repurchasing contain the information that companies wish to convey to their shareholders. Once the reasons of share repurchase are identified it would be possible to find out what signal they transmit to shareholders. The article analyses selected statistical data on the listed companies that repurchased their shares from selected countries. It also focuses on the reasons of share repurchase of the listed companies. Having carried out research for the selected listed companies, I found that share repurchases are not used to signal only the excessive amounts of cash hold in the corporation. There are also other reasons for share repurchase. These reasons might comprise the following: changing the structure of ownership or stabilizing the market share prices. And companies might use share repurchases for conveying different information to their shareholders. The conclusions drawn from my observations and statistical data may constitute a viable basis for more comprehensive research. One possible direction of such research is to determine the financial situation of companies repurchasing their shares. Another possible direction of research is to identify the financial market condition of the company repurchasing their shares. The article attempts to discuss the reasons of share repurchase programs. The uniqueness of this approach lies in analysing share repurchase in a broader sense, where it is viewed not to be a mere substitution for dividends.

Keywords: share repurchase; dividend; substitution; information content (search for similar items in EconPapers)
Date: 2013
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