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The performance of Taiwanese firms after a share repurchase announcement

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Abstract

This study uses stochastic dominance analysis to examine the financial performance of Taiwanese firms from 2000 to 2013 after their announcement of a share repurchase program. Our results show that the firms in the repurchase portfolio perform poorly prior to the announcement, but improve dramatically to outperform different benchmarks after the repurchase announcement. For firms in the repurchase portfolio, we find that (1) the firms with a high book-to-market ratio outperform firms with a low book-to-market ratio, (2) smaller firms outperform larger firms, and (3) there is no significant difference in performance between firms with different percentages of completing the repurchase programs.

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Notes

  1. See Stephens and Weisbach (1998), Ginglinger and Hamon (2007), Ikenberry et al. (2000), Zhang (2002, 2005), and Lee et al. (2005).

  2. The idea of the subsampling bootstrap procedure used in LMW is to sampled blocks of data without replacement to account for non iid features of the data.

  3. One U.S. dollar is roughly equal to NT$29.6.

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Acknowledgments

We thank an anonymous referee along with Johnny Chan, Yu-Chin Hsu, Keng-Yu Ho, Tung Liang Liao and Kuei-Chih Lee for helpful suggestions and comments. Excellent research assistance was provided by Shiao-Han Shen is appreciated. We are grateful to Dr. Andrew Szanajda and Mr. Elon Cadogan at the writing center of Feng Chia University for editorial assistance. Dr. Hsu would like to acknowledge the Ministry of Science and Technology, Taiwan for the 2014 PBFEAM Meeting travel fund (103-2914-I-035-015-A1).

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Authors and Affiliations

  1. Department of Finance, Feng Chia University, Taichung, Taiwan

    Chuan-Hao Hsu

  2. Dr. Y.S. Tsiang Professor of Chinese Studies, College of Business Administration, University of Missouri-St. Louis, One University Blvd, St. Louis, MO, 63121, USA

    Hung-Gay Fung

  3. Department of Financial Engineering and Actuarial Mathematics, Soochow University, Taipei, Taiwan

    Yi-Ping Chang

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  1. Chuan-Hao Hsu
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  2. Hung-Gay Fung
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  3. Yi-Ping Chang
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Correspondence to Hung-Gay Fung.

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Hsu, CH., Fung, HG. & Chang, YP. The performance of Taiwanese firms after a share repurchase announcement. Rev Quant Finan Acc 47, 1251–1269 (2016). https://doi.org/10.1007/s11156-015-0537-x

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