An Empirical Study on Stock Repurchases by Taiwan Stock Exchange Listed Companies

• Main Authors: Lee, Chung-Shiang, 李宗祥
• Other Authors: Lin, Yun Ph.D
• Format: Others
• Language: zh-TW
• Published: 2001
• Online Access: http://ndltd.ncl.edu.tw/handle/88145897653862089066

碩士 === 國立臺灣大學 === 財務金融學研究所 === 89 === ABSTRACT of THESIS Title of Thesis: An Empirical Study on Stock Repurchases by Taiwan Stock Exchange Listed Companies Name of Institute: Graduate Institute of Finance, National Taiwan University Graduate Date: January, 2001 Degree Conferred: Master Degree Name of Student: Lee, Chung-Shiang Advisor: Lin, Yun, Ph.D. Abstract: The results of this research are reached through questionnaire survey and analyzing the motives of Taiwan Stock Exchange listed companies that announced stock repurchase and conducting empirical study on actual results of companies that already repurchased their stock after the announcement. The findings of this research stated as follows: 1.The primary motive for the management of companies repurchased their stock when they believe it is undervalued. The secondary motive for the management to repurchased their stock is to demonstrate their confidence in the companies’ future earning and stock price. The management is less likely to use stock repurchase as a tool for adjusting its existing capital structure or increasing debt ratio. 2.Most empirical work has shown that cumulated abnormal return in stock price deems to be 3.95% in average, measure taken from a day prior to the announcement date until a day after the actual announcement made. Similar results indicated from studies done by foreign academic researchers. 3.After the announcement of stock repurchase by the management who believes that its stock price is temporarily depressed, the stock market reaction to the announcement of a stock repurchase is usually favorable. Most empirical work has shown that the stock price performance of securities after a buy-back is significantly better than the stock price performance of comparable companies that do not repurchase. The abnormal return in stock price appears to be obvious when actual repurchased shares deemed to be significant and for the companies’ price to book ratio below average. However, the abnormal return is not as obvious when announced repurchases shares deemed to be significant. The conclusion of this research is reached by conducting questionnaire survey and empirical study. The motive for and the result of domestic listed companies that announced stock repurchase are unanimously same as information signaling hypothesis. Exchange listed companies could essentially utilize the announcement of stock repurchase as a mean to improve market efficiency and information asymmetric, also to reduce chance of their stock being undervalued. A final suggestion, universally reached conclusion by foreign academic researchers suggest that companies repurchased their stock by the mean of tender offer is more inclined to result in abnormal return in stock price than repurchasing their stock through open market. Therefore, Securities & Future Commission shall ease the requirement for companies to repurchase their stock by mean of tender offer. Especially for those companies’ stock price fell below its par value or net asset value shall repurchase their stock through tender offer in order to send a stronger signal to the market.