SHORT-TERM IMPACT OF STOCK REPURCHASE PROGRAMS ON STOCK PRICE
Lammi, Olli (2019-10-20)
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe2019102033968
https://urn.fi/URN:NBN:fi-fe2019102033968
Tiivistelmä
ABSTRACT
The purpose of this master´s thesis is to study short-term effects of stock repurchase programs. The study aims to document effects during different time periods of stock buyback programs using actual buybacks, following periods when firms do not acquire any shares. This allows to expand ongoing research and show what effects does quitting repurchases have on the stock price.
Thesis uses Finnish data to achieve the goal to examine day-to-day effects because of the regulations in Finland which demand companies to announce daily buybacks before the next trading day. Data have been hand-picked from Nasdaq Helsinki company releases using time period of 2008 to 2017. Total sample includes 7 215 days of stock repurchases which are examined as daily observations, formed into portfolios of at least 10-days (99 events) and 15-days (63 events) of continuous buybacks and portfolio of 25-days (63 events) of buybacks with maximum of three days without any stock repurchases. All event periods follow a ten-day period without any stock repurchases to examine the effect when quitting the buybacks.
The results suggest that actual buybacks have a positive daily effect of 0,0815 % on the stock price, while quitting buybacks has a negative effect on the stock price. The biggest positive and negative effects are mainly on ten-day period around quitting the buybacks. Positive average abnormal returns start to cumulate in around six days before a company ends their stock repurchases. Negative returns start to cumulate directly after a company quits buybacks for around four days. Considering the main event window and overall effect of stock buybacks study finds to have mixing results, ten-day portfolio reports negative CAAR, when 15-days and 25-days portfolios report positive average abnormal returns with only 25-day portfolio having statistically significant results.
The purpose of this master´s thesis is to study short-term effects of stock repurchase programs. The study aims to document effects during different time periods of stock buyback programs using actual buybacks, following periods when firms do not acquire any shares. This allows to expand ongoing research and show what effects does quitting repurchases have on the stock price.
Thesis uses Finnish data to achieve the goal to examine day-to-day effects because of the regulations in Finland which demand companies to announce daily buybacks before the next trading day. Data have been hand-picked from Nasdaq Helsinki company releases using time period of 2008 to 2017. Total sample includes 7 215 days of stock repurchases which are examined as daily observations, formed into portfolios of at least 10-days (99 events) and 15-days (63 events) of continuous buybacks and portfolio of 25-days (63 events) of buybacks with maximum of three days without any stock repurchases. All event periods follow a ten-day period without any stock repurchases to examine the effect when quitting the buybacks.
The results suggest that actual buybacks have a positive daily effect of 0,0815 % on the stock price, while quitting buybacks has a negative effect on the stock price. The biggest positive and negative effects are mainly on ten-day period around quitting the buybacks. Positive average abnormal returns start to cumulate in around six days before a company ends their stock repurchases. Negative returns start to cumulate directly after a company quits buybacks for around four days. Considering the main event window and overall effect of stock buybacks study finds to have mixing results, ten-day portfolio reports negative CAAR, when 15-days and 25-days portfolios report positive average abnormal returns with only 25-day portfolio having statistically significant results.