Price Reaction to Stock Repurchase: Evidence from KLSE

Abstract

This paper examines several issues related to stock repurchases by Malaysian listed Companies. A total listed companies that announced repurchases over a4 year period were examined. Of these, 43 followed through with stock buyback. The other 88 companies announced the repurchase not execute the buyback. We find that the buyback announcement is viewed positively. Stock react favourably to the announcement. Relative 10 main board firms, we found second board 40 react more favourably. Interestingly, the announcement effect on stock prices, appears to be prominent than the effect of the actual repurchase. Companies that went on to execute the ‘had experienced steeper price declines than those that only announced. Companies that 10 cancel the repurchased shares had no higher price impact than those that kept the shares back as treasury stock. As expected, stocks with warrants had a more subdued price reaction 10 those that did not. In examining the pre announcement price behaviour, we find evidence leakage. This leakage seems more prominent for second board firms.