Share repurchase: Does it increase the informativeness of market prices?

Hubert de La Bruslerie (1)

1 DRM - Dauphine Recherches en Management

Share repurchases are transactions which are supposed to cause a market reaction through a signaling approach. However looking only at cumulated abnormal returns (CARs) is insufficient and the results are sometimes contradictory. We introduce the concept of informativeness to assess if repurchases improve the private information content of stock prices. Our empirical test comprises American and European buybacks in the period 1990-2011. We use the synchronicity measure introduced by Roll (1988) to follow the change in informativeness before and after the announcement of a transaction. The determinants of informativeness and CARs are also investigated. Our results are negative: Informativeness does not systematically improve, but may sometimes if a change of dividend policy jointly occurs.

Mots clés: buybacks; market efficiency; informativeness; Share repurchase

Domaines: Gestion et management

Hubert de La Bruslerie. Share repurchase: Does it increase the informativeness of market prices?. 20th Multinational Finance Society Conference, Jun 2013, Ismir, Turkey. ⟨halshs-00937565⟩