Short-Term Returns of UK Share Buyback Activity

Carol Padgett () and Zhiqi Wang ()
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Carol Padgett: ICMA Centre, University of Reading
Zhiqi Wang: ICMA Centre, University of Reading

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: This paper examines the short-term signalling power of UK open market share repurchases between 1999 and 2004. The 5-day and 11-day abnormal returns centred on the announcement date are statistically significant at 1.13% and 1.21% respectively. However, there is no evidence to support any relationship between the 5-day announcement abnormal returns and characteristics of UK share repurchases, such as the percentage of shares to be repurchased, pre-announcement return, size and lag time. These results are largely in line with results reported by Rees (1996). It seems that UK share repurchases are not primarily motivated by share undervaluation. That is why the signalling hypothesis fails to explain the announcement abnormal returns of the UK open market share repurchases.

Keywords: UK share repurchases; signalling hypothesis; share undervaluation; announcement abnormal returns (search for similar items in EconPapers)
JEL-codes: G32 G35 (search for similar items in EconPapers)
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Citations: View citations in EconPapers (2)

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