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Long-term Abnormal Returns Following Share Repurchase Announcements: Do repurchasing firms outperform the market?
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
2018 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

We study the long-term performance of companies listed on the Stockholm Stock Exchange that announced their intention to repurchase shares between the years of 2005 and 2013. We test the hypothesis that the market underreacts to share repurchase announcements and that repurchasing firms consequently outperform the market in the following years. We find that repurchasing firms yield a cumulative abnormal return of 15.76 percent, significant at the 1 percent level, over the four years following the announcement. To address the concern that microcaps may be driving the results, we also investigate the differences in abnormal returns between companies of different sizes. We form three portfolios based on market capitalization and find that the large, medium-sized and small companies yield 14.34 percent, 20.13 percent and 6.61 percent respectively.

Abstract [sv]

Vi studerar den långsiktiga avvikelseavkastningen för företag noterade på Stockholmsbörsen som annonserat aktieåterköp mellan åren 2005 och 2013. Vi testar hypotesen att marknaden underreagerar på dessa annonseringar och att aktieåterköpande företag överpresterar marknaden de nästkommande åren. Vi finner att företag som återköper aktier ger en kumulativ abnormal avkastning på 15,76 %, signifikant på enprocentsnivån, under fyra år efter att företaget annonserat ett aktieåterköpsprogram. För att bemöta kritik mot tidigare anomaliforskning om att microcaps ofta snedvrider resultaten, undersöker vi skillnader i avvikelseavkastning mellan företag i olika storlek. Vi skapar tre portföljer baserat på företagens marknadsvärde och finner att stora, mellanstora och små företag genererar en kumulativ avvikelseavkastning på 14,34 %, 20,13 % samt 6,61 %.

Place, publisher, year, edition, pages
2018. , p. 32
Keywords [en]
Open market share repurchase, Abnormal return, Sweden, Stockholm Stock Exchange, NASDAQ OMX Stockholm
Keywords [sv]
Aktieåterköp, Avvikelseavkastning, Stockholmsbörsen, NASDAQ OMX Stockholm
National Category
Business Administration
Identifiers
URN: urn:nbn:se:uu:diva-354789OAI: oai:DiVA.org:uu-354789DiVA, id: diva2:1222662
Subject / course
Business Studies
Educational program
Bachelor Programme in Business and Economics
Supervisors
Available from: 2018-06-25 Created: 2018-06-21 Last updated: 2018-06-25Bibliographically approved

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CiteExportLink to record
Permanent link

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Citation style
  • apa
  • ieee
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  • vancouver
  • Other style
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  • Other locale
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Output format
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