The Relative Signaling Power of Open-Market and Subsidiary Share Repurchases in Taiwan Stock Market
Journal of Financial Studies
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Title |
The Relative Signaling Power of Open-Market and Subsidiary Share Repurchases in Taiwan Stock Market |
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Creator |
C. Edward Wang
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Description |
The coexistence period of open-market repurchases and subsidiary buybacks provides a valuable opportunity to test signaling power of share repurchases in Taiwan. Given the findings that the announcements for both types of share repurchases incur positive market responses and possess the information contents of undervalued share prices, this paper strongly supports the signaling hypothesis. The evidence also confirms that open-market repurchases have stronger signaling power than subsidiary buybacks. In addition, we find that open-market repurchases can reduce agency cost of equity through the distribution of excess capital to stockholders, while subsidiary buybacks help current management keep controlling the firm. Finally, this paper reveals that the announcement effect is more pronounced when the probability of stock undervaluation is higher and the management has less incentive to send false signals, both of which then further increase the possibility of choosing open-market repurchases as financial signals. Key words: Financial Signaling, Open-Market Share Repurchase, Subsidiary Buyback for Parent Stock |
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Publisher |
Journal of Financial Studies
財務金èžå¸åˆŠ |
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Date |
2011-05-27
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Type |
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Format |
application/pdf
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Identifier |
http://www.jfs.org.tw/index.php/jfs/article/view/2011121
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Source |
Journal of Financial Studies; Vol 16, No 4 (2008); 1
財務金èžå¸åˆŠ; Vol 16, No 4 (2008); 1 |
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Language |
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