Share repurchases: abnormal performance and motives behind the announcements

Abstract

In this paper I study the short- and long-term abnormal returns around open-market share repurchase program announcements. I focus on announcements in Western Europe from 1990 to 2020. Additionally, I obtain cross-sectional regressions aiming to understand the factors causing the abnormalities. I find statistically significant announcement returns of 1.06% and long-term cumulative abnormal returns of 14.2%. The closer examination of the returns does not suggest that either short-term or long-term returns are in decline. The results fail to find an explicit explanation for the initial impact of the announcement, such as the signaling undervaluation hypothesis or agency theory.