Signaling effect of the "buyback" of shares in Russia
The effect of the announcement of the "buyback" of the shares at their price. Reasons for repurchase of own shares. The study of the effect of takeover danger on motivation of firms for repurchase of shares on financial markets using fictitious variable.
| Рубрика | Финансы, деньги и налоги |
| Вид | курсовая работа |
| Язык | английский |
| Дата добавления | 30.08.2016 |
| Размер файла | 371,8 K |
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Conclusion
The first stated aim of the work was to study the effect of the «buyback» announcement on the stock price. That was done conducting event study method of the announcement of the repurchase of shares by the company. The methodology was performed on different event windows:
· Three days before and three days after the announcement.
· Three days before and sixty days after the announcement.
The cumulative abnormal return was significantly positive in both event windows, which means that as expected the information about buying back of the stocks positively affects the stock prices in subsequent periods. Moreover positive cumulative abnormal return was evident even before the effective date of announcement which can signalize about uncontrolled presence of insider information of the firms. The above fact also tells about strong inefficiency of the Russian financial market.
The second aim of the work was to outline and empirically prove the main reasons which effect the decision of the management to buy back own shares of the company. During the regression analysis, the significant relationship between excess free capital on the firms balance sheet and the information about mergers and acquisitions were found. In other words the more free capital the firm has and more the firm is in danger to be the target of takeover, the more motivations the management of this firm has to «buyback» on the basis of Russian financial markets.
It is worth discussing the insignificant variables of the analysis, which basically showed that the presence of mispricing and undervaluation of the company is not the motivation for firms to buy back their own stocks. «buyback» is not considered as alternative to dividend payout policy, so substitution dividends paid by shares repurchased is not the reason for «buyback» in Russia. Moreover, the problem of asymmetry of the information and not precise monitoring of small firms in Russia are not motivation for managers to participate in «buyback» operations.
This work can be considered as the base to the other researches of the «buyback» phenomena on Russian markets. Authors can obtain deeper results using more precise variables and more accurate proxies for different indicators.
References
1. Кинякин А., Buy - back россии?ских компании?: причины и следствия: Рынок ценных бумаг. (2012)No.4. - p.71-74. ?
2. Grullon and Michaely?»Dividends, Share Repurchases, and the Substitution Hypothesis» (2002).
3. Theo Vermaelen «Share repurchases can be a good deal»: Financial times 19 october 2006.
4. The New York Times.
5. Brav, Graham, Harvey and Michaely «Payout policy in the 21st century» : Journal of Financial Economics 77 2005.
6. Erik Lie and Heidi J. Lie «The Role of Personal Taxes in Corporate Decisions: An Empirical Analysis of Share Repurchases and Dividends»: Journal of Financial and Quantitative Analysis vol. 34, no. 4; December 1999:533-552
7. Jagannathan, Stephens & Weisbach «Financial flexibility and the choice between dividends and stock repurchases» 2000.
8. Ofer and Thakor «A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends» 1987.
9. Dittmar «Why do firms repurchase stocks» 2000.
10. Stephens & Weisbach «Actual Share Reacquisitions in Open-Market Repurchase Programs» 1998.
11. Alon, Brav, Harvey, Michaely «Payout Policy in the 21th Century: The Data» 2005
12. Lakonishok, Shleifer and Vishny «Contrarian Investment, Extrapolation, and Risk» 1994.
13. Warren Buffet quote 2000.
14. Theo Vermaelen «Common stock repurchases and market signaling: An empirical study» 1981.
15. Scholes and Williams «Estimating betas from nonsynchronous data» 1977.
16. Liano, Huang and Manakyan «Market Reaction to Open Market Stock Repurchases and Industry Affiliation» 2003.
17. Liu and Ziebart «Stock Returns and Open-Market Stock Repurchase Announcements» 1997.
18. Padgett «Short-term Returns of UK Share Buyback Activity» 2007.
19. Padgett «UK Share Repurchase Activity: The Effects of Free Cash Flow» 2007.
20. Lakonishok & Vermalen and Ikenberry «Market underreaction to open market share repurchases» 1995.
21. Fama and French «The Cross-Section of Expected Stock Returns» 1992.
22. Kivi «Share Repurchase Practises in Finland».
23. Dixon, Palmer, Stradling and Woodhead «An empirical survey of the motivation for share repurchases» 2008.
24. Bagwell «Share Repurchase and Takeover Deterrence» 1991.
25. Billet and Xue «The Takeover Deterrent Effect of Open Market Share Repurchases» 2007.
26. Hurtt, Kreuze and Langsarn (2008)
27. Woods and brigham «Stockholder Distribution Decisions: Share Repurchases on Dividends» 1966.
28. MacKinley «Event Studies in Economics and Finance» 1997.
29. ICEF lectures on Elements of Econometric by O.O Zamkov
30. Open Sources such as: Finam.ru; investfunds.ru; finanz.ru
31. Bloomberg
32. Thomson Reuters.
Appendix 1
1. Undervaluation of the company increases the ptobability of «buyback».
LNPE variable: natural logarithm of p/e ratio.
2. The smaller the company the lower probability of the repurchase.The problem of asymmetry of information.
LNREV variable: narutal logarithm of revenue indicator
3. The dividends payout policy negatively affects the probability of «buyback».
DIV_PAYOUT variable:
4. Repurchase of stocks is more active when company face the takeover probability.
Dummy variable TAKEOVER.
5. Buy-back» positively depends on excess capital of the firm.
CASHFLOW variable:
6. Control variable:
LEVERAGE: d/e ratio of the firm.
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-3.7402% |
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Размещено на http://www.allbest.ru/
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6.7499% |
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3.1738% |
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9.1722% |
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-3.2800% |
average |
1.0755% |
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5.9144% |
stdev |
0.052412224 |
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-8.6591% |
t-stat |
2.021061195 |
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-1.3576% |
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1.3593% |
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1.7905% |
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-7.6868% |
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5.3072% |
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11.1673% |
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11.5308% |
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3.0012% |
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9.9224% |
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0.8540% |
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1.4153% |
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-0.3904% |
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7.8513% |
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-0.2550% |
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-5.4537% |
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-12.1153% |
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7.5182% |
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6.5676% |
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0.8098% |
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1.4500% |
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0.4360% |
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-4.0328% |
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10.4174% |
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4.0078% |
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3.3584% |
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-2.7567% |
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-2.8137% |
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-1.4591% |
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-1.9197% |
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0.1776% |
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1.8896% |
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-5.4627% |
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-2.5056% |
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3.4935% |
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10.7044% |
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0.4143% |
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6.2094% |
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-3.1169% |
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-9.4332% |
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1.1450% |
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1.9434% |
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2.7722% |
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-0.9179% |
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0.7362% |
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1.3018% |
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3.0580% |
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0.7216% |
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1.6745% |
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1.3225% |
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1.2073% |
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0.5525% |
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-1.8746% |
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3.2827% |
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-3.0204% |
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3.0650% |
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-2.7230% |
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-10.0567% |
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-2.9990% |
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1.9978% |
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-2.0939% |
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6.0637% |
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1.4743% |
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5.0136% |
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-3.3297% |
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7.1152% |
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7.3463% |
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0.8864% |
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4.8393% |
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0.6997% |
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0.5333% |
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2.9973% |
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-2.7096% |
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-8.3125% |
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-1.4354% |
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3.0097% |
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-7.4686% |
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0.4531% |
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1.1753% |
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-1.0126% |
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8.2392% |
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6.8313% |
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-1.5943% |
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1.8164% |
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3.0189% |
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11.8382% |
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-6.7713% |
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15% |
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0.04614684% |
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CAR -3 +40 |
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0.00000000% |
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0.07806383% |
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0.14796380% |
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-0.00309248% |
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0.28610601% |
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-0.19268570% |
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average |
0.23936040% |
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-0.25053074% |
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stdev |
0.013903097 |
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-0.25740291% |
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t-stat |
1.695612508 |
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0.54733405% |
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-0.01556845% |
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0.48732981% |
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1.83522824% |
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0.31739538% |
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0.21723851% |
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0.72016913% |
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0.05576672% |
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0.13977487% |
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0.13376551% |
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0.23464897% |
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2.50000000% |
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0.21244743% |
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0.06410674% |
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0.00215111% |
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0.24283137% |
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0.18410971% |
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0.11373758% |
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0.04923677% |
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0.16789408% |
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0.01173882% |
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0.00861795% |
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-0.21167687% |
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0.01875570% |
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0.13062089% |
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0.06947860% |
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0.13184594% |
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0.44881918% |
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-0.18777815% |
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0.97997614% |
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0.74410819% |
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0.81843844% |
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0.85359872% |
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0.76415526% |
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1.30000000% |
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0.48524380% |
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0.08684060% |
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0.02282845% |
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0.03495859% |
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0.04719406% |
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12.79576706% |
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2.60000000% |
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