Abstract
This paper examines the market reaction to Toronto Stock Exchange (TSX) stock repurchase announcements. The findings indicate that TSX stock repurchase announcements result in a significant market reaction and provide mixed support for the TSX requirements to disclose the reason(s) for a stock repurchase program and to report actual share repurchases on a timely basis.
Highlights
Prior studies on stock repurchase announcements have consistently documented positive abnormal returns around the announcement
This study contributes to the literature on stock repurchases by examining whether the additional information provided by Toronto Stock Exchange (TSX) firms is useful to the market
This study examines the market reaction to repurchase announcements by TSX firms
Summary
Prior studies on stock repurchase announcements have consistently documented positive abnormal returns around the announcement. I examine the market reaction to repurchase announcements made by Toronto Stock Exchange (TSX) traded firms. The first phase examines the market reaction to repurchase announcements by TSX firms during the period 1995 to 2005. The second phase of my study develops and tests an explanatory model of the abnormal returns surrounding repurchase announcements. This study contributes to the literature on reputation by examining whether management’s follow-through on previous repurchase announcements affects the market reaction to subsequent announcements. This study contributes to the literature on stock repurchases by examining whether the additional information provided by TSX firms (timely reports, disclosure of the reason for the repurchase program) is useful to the market.
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