MARKET REACTION
OF SHARE REPURCHASES:
EMPIRICAL EVIDENCE FROM 32 SMALL AND LARGE FIRMS IN KLSE
By
CHOW SHEAU WEN
Although share buy back is a relatively new phenomenon in Malaysia, many companies have been actively taking advantage of share repurchases in current market. Most of the buyback firms serve under valuation as a critical motivation for them to repurchase their own shares. This paper document the market reaction of share repurchases in Malaysia, and the impacts on different firm sizes on the abnormal performance of share repurchase, by the measuring of cumulative abnormal return (CAR) that achieved by the sample firms. The conduction of CAR analysis or event study aimed to investigate the under valuation and signaling effect of share repurchase in Malaysia. Moreover, a survey study is also carried to examine whether the investors’ potential reactions toward share repurchase announcement are affected by their perceptions regarding the motives and return of the buyback. The finding of this study shows that the market generally react positively to the repurchase announcements made by the firms that listed in KLSE. By the evaluation of CAR, this study finds that the under valuation motive of share repurchase in Malaysia capital market is true for certain event window. Moreover, the finding of the CAR for certain window shows that the repurchases made by the small firms are more likely to be driven by the under valuation motive. The results of this study are basically consistent with previous researches that done in overseas. Lastly, this study probes that the investors’ potential reactions toward share repurchase announcement are depending on their perceptions regarding the motives and return of the buyback
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B. A. (Hons) In Finance
Number: 3