Determinants of share returns following repurchase announcements in China

  • Received February 18, 2017;
    Accepted March 29, 2017;
    Published May 31, 2017
  • Author(s)
    Christopher Gan
    ORCID , Chao Bian , Damon Wu , David A. Cohen
  • DOI
    http://dx.doi.org/10.21511/imfi.14(2).2017.01
  • Article Info
    Volume 14 2017, Issue #2, pp. 4-18
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  • Cited by
    7 articles
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By combining the market model with the three-factor model, this study investigates firms’ share returns after the announcement of share repurchase. Employing data for China’s A-share market, this study’s sample utilizes 417 share repurchase announcements over the period of 2000 to 2012. Empirical results show that firms with higher sales growth rates are more likely to send a positive signal to the market through their share repurchase efforts. Analysis also shows that the higher a firm’s price-to-earnings ratio (utilized as a measure of overvaluation), the lower the firm’s cumulative abnormal returns. These results imply that Chinese share markets put more emphasis on the firm’s future growth and share overvaluation.

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    • Figure 1. Frequencies of share repurchase announcements (2000-2012)
    • Figure 2. Average cumulative abnormal returns (with event window (-20, 20))
    • Table 1. Variable definitions (for equation (5))
    • Table 2. Summary for share repurchases in Chinese share markets (2000-2012)
    • Table 3. Descriptive statistics during the event window (-20, 20)
    • Table 4. Break-down of cumulative abnormal returns
    • Table 5. Estimated results of multi-factor model (equation (5))
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