An announcement effects of share repurchase based on the prior consecutive events

逢 甲 大 學

經營管理碩士在職專班

碩士論文

連續事件基礎之庫藏股買回宣告效果

The Announcement Effects of Share Repurchase

based on the Prior Consecutive Events

指導教授: 王若愚

邱安安

研 究 生 : Ngo Mai Phuong (吳梅鳳)

中華民 國 一 百 零 七 年 二 月

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Acknowledgement

I would also like in a special way to acknowledge crucial role played by my

supervisors, Dr. Wang and Dr. Chiu, for their invaluable support and guidance at FengChia

University. Further, my gratitude and appreciations go to all those individuals and

organizations whose contributions facilitated the completion of this thesis work. I am

sincerely grateful for those who shared their truthful and illuminating views on a number of

issues related to this thesis. Their invaluable and constructive criticism added value to this

document. Finally, I would like to appreciate the guidance given by the panelist especially my

presentation at all stages that has since improved my presentation skills and then quality of

my document.

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摘要

本研究測試台灣 2008 年至 2016 年股票市場上各種事件後的庫藏股買回宣告效果。研

究上將庫藏股宣告前之特定事件區分為現金增資及發行公司債券兩種，並比較這兩種事件後

宣告買回庫藏股之效果。本研究之資料來源為台灣經濟新報資料庫，共蒐集 2858 件庫藏股買

回事件，其中有 105 次庫藏股宣告之前一年亦宣告進行現金增資，而有 299 家次庫藏股宣告

前一年發行公司債。

本研究主要發現庫藏股宣告前企業之異常報酬為負值，而宣告後之異常報酬為正，顯

示庫藏股宣告對股價有正面的助益，尤其在宣告後的第一天更為明顯。而前一年先進行現金

增資，再宣告買回庫藏股的效果雖然有向上的趨勢，但是累積宣告效果始終為負值，亦即對

股價不會有正面的助益。而企業在前一年有發行公司債券者，則在第二年進行宣布買回庫藏

股之效果為正，顯示這樣的財務操作模式對於股價有正面的幫助。

關鍵字: 庫藏股，買回庫藏股 ，連續事

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Abstract

In my research, I examine the share repurchase announcement effect on various

consecutive events in Taiwan from August 2008 to 2016. This study separates the dataset into

different groups based on some events, and the announcement effect difference between the

consecutive. I choose the consecutive events of the seasoned equity offering, Bonds and stock

distribution to comparing announcement share repurchases. The paper consists of 2858 share

repurchase announcements by 2588 firms listed on TEJ, 105 events that announce SEO and

then repurchase announcement next year and 299 events that issue bond and then repurchase

announcement next year, 555 events that stock distribution and then repurchase announcement

next year. Event study methodology and significance test have been used to analyze.

This study found that Taiwan market is under-reacting to the announcements of share

repurchases. After announcement day +1 abnormal return was reached on top. The paper

found that Taiwan market is weak-reacting efficient to SEO announcement while significant

reaction efficient to open-market repurchase announcement. And issuing bonds was the lowest

signal than repurchases announcement effect to Taiwan market, but issuing bond will effect

to share price of announcement repurchase next year. The last, the repurchase announcement

has a significant effect on stock return after the stock distribution announcement.

Keywords: repurchase stock, buyback stock, consecutive events

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Table of Contents

Acknowledgement ....................................................................................................................i

Abstract...................................................................................................................................iii

Chapter 1 Introduction ............................................................................................................. 1

1.1 Background .................................................................................................................... 1

1.1.1 Share repurchase...................................................................................................... 1

1.1.2. Share repurchase announcement in Taiwan ........................................................... 2

1.2 Research Problem........................................................................................................... 3

1.3 Research Object.............................................................................................................. 6

1.4 The structure of the paper............................................................................................... 6

Chapter 2 Literature Review.................................................................................................... 7

2.1 Share Repurchases Motivations..................................................................................... 7

2.2 Effect of share repurchases ............................................................................................. 9

Chapter 3 Data and Methodology.......................................................................................... 12

3.1 Data .............................................................................................................................. 12

3.2 Event study................................................................................................................... 13

3.3 Methodology ................................................................................................................ 14

4.1 Whole market impact of announcement repurchases................................................... 16

4.2 The consecutive effects of the event ............................................................................ 24

4.2.1 The effect the repurchases with a prior SEO announcement................................. 24

4.2.2 The effects of repurchase announcement with a prior Bond issuing..................... 34

4.2.3 The effects of repurchase announcement with a prior Stock dividend distribution.... 43

Chapter 5 Conclusions........................................................................................................... 51

References.............................................................................................................................. 52

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List of Figures

Figure 1 AR and CAR of repurchase announcement of The Market Index Adjustment model

....................................................................................................................................19

Figure 2 ARs and CARs of repurchase announcement of The GARCH Risk Adjustment

Model..........................................................................................................................19

Figure 3 Events window CARs of Market Index Adjustment model..................................22

Figure 4 Event window CARs of the GARCH Risk Adjustment Model ............................22

Figure 5 Development of the ARs around the SEO announcement ....................................27

Figure 6 Development of the CARs around the SEO announcement..................................27

Figure 7 ARs and CARs of the repurchase announcement with a prior SEO event............31

Figure 8 ARs and CARs of the repurchase announcement with a prior SEO event............32

Figure 9 CARs around Corporate Bond issuing ..................................................................35

Figure 10 CARs around Convertible Bond issuing .............................................................35

Figure 11 ARs and CARs of the repurchase announcement with a prior Corporate Bond of

the Market Index Adjustment Model .........................................................................37

Figure 12 ARs and CARs of the announcement repurchase with a prior Convertible Bond

with Market Index Adjustment Model .......................................................................38

Figure 13 ARs and CARs of repurchase announcement with a prior Corporate bond issuing

of GARCH Risk Adjustment Model ..........................................................................40

Figure 14 ARs and CARs of repurchase announcement with a prior Convertible Bond with

GARCH Risk Adjustment ..........................................................................................40

Figure 15 ARs and CARs of stock dividend distribution of Market Index Adjustment Model

....................................................................................................................................44

Figure 16 ARs and CARs of stock dividend distribution of the GARCH Risk Adjustment

Model..........................................................................................................................46

Figure 17 ARs and CARs of repurchase announcement with a prior Stock dividend

distribution..................................................................................................................48

Figure 18 ARs and CARs of repurchase announcement with a prior stock dividend

distribution of the GARCH Risk Adjustment Model.................................................49

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List of Tables

Table 1 Summary Statistic ..................................................................................................... 12

Table 2 ARs and CARs around announcement repurchase analysis by the Market Index

Adjustment Model........................................................................................................ 18

Table 3 ARs and CARs around announcement repurchase analysis by the GARCH Risk

Adjustment Model........................................................................................................ 20

Table 4 ARs and CARs around repurchase transactions....................................................... 23

Table 5 Development of the AR and CAR around the SEO announcement of Market Index

Adjustment ................................................................................................................... 26

Table 6 Development of the ARs and CARs around the SEO announcement of GARCH

Risk Adjustment Model................................................................................................ 28

Table 7 ARs and CARs of the repurchase announcement with a prior SEO event of the

Market Index Adjustment Model ................................................................................. 30

Table 8 ARs and CARs of the repurchase announcement with a prior SEO event of the

GARCH Risk Adjustment Model................................................................................. 33

Table 9 ARs and CARs around Bond issuing........................................................................ 36

Table 10 ARs and CARs of Repurchase Announcement with a prior Corporate Bond issuing.... 41

Table 11 ARs and CARs of the Repurchase Announcement with a prior Convertible Bonds

issuing........................................................................................................................... 42

Table 12 ARs and CARs around Stock dividend distribution of The Market Index

Adjustment Model on the period 2000-2016................................................................ 45

Table 13 ARs and CARs around stock dividend distribution of the GARCH Risk

Adjustment Model on the period 2000-2016................................................................ 47

Table 14 ARs and CARs around repurchase announcement with a prior stock dividend

distribution on the period 2000 - 2016 ......................................................................... 50