Short-run performance of recent Australian on-market share buy-back announcements

Ekanayake, Samson 2003, Short-run performance of recent Australian on-market share buy-back announcements, in Proceedings of the Emerging Financial Services in Asia-Pacific Conference, University of Western Sydney, Sydney, N.S.W., pp. 1-9.

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Title Short-run performance of recent Australian on-market share buy-back announcements
Author(s) Ekanayake, Samson
Conference name Emerging Financial Services in Asia-Pacific Conference (2003 : Sydney, Australia)
Conference location Sydney, Australia
Conference dates 14-16 May 2003
Title of proceedings Proceedings of the Emerging Financial Services in Asia-Pacific Conference
Editor(s) Hettihewa, Samanthala
Ross, Don
Publication date 2003
Start page 1
End page 9
Publisher University of Western Sydney
Place of publication Sydney, N.S.W.
Keyword(s) Australian share buy-backs
signalling
short-term price reaction
Summary Share buy-backs (or share repurchases) have become increasingly popular among Australian companies during the recent times. One of the aims of share buy-back is to increase the shareholders' wealth by increasing the market price of company shares. While there are several ways of buying backs shares, on-market buy-backs is the most popular method of share repurchase in Australia. Australian listed companies have announced more than two hundred on-market share buy-backs over the past three years. The aim of this paper is to examine the short-run market performance of these recent on-market buy-back announcements.

Short-term effect of on-market buy-back announcements on the share price is an issue, which is theoretically interesting and practically important. Buy-back announcements are believed to convey a signal to the market (i.e., signalling effect). If the market considers this signal positively, the short-run price of the shares would increase. If the signal were considered negatively, the short-run price of shares would decrease. If there is no signalling content or the signal is neutral the price would remain the same. In this study, signalling effect of share buy-back announcements is empirically examined using most recent Australian data. The total population of on-market buy-back announcements that have been lodged with Australian Stock Exchange by Australian listed companies during the period from 1 January 2000 to 10 March 2003 are included in this study. The abnormal market return over the short-run (announcement day and 10 trading days centred on the announcement date) is examined using the All Ordinaries Accumulation Index as the reference portfolio. The daily abnormal returns (AR) and cumulative abnormal returns (CAR) during the event period are computed. The results indicate that the Australian market generally positively reacts to on-market buy-back announcements.
ISBN 1741080207
9781741080209
Language eng
Field of Research 150201 Finance
HERDC Research category E1 Full written paper - refereed
ERA Research output type E Conference publication
Persistent URL http://hdl.handle.net/10536/DRO/DU:30005137

Document type: Conference Paper
Collection: School of Accounting, Economics and Finance
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