The Practice of Share Repurchase and Its Signaling Impact on Stocks Quoted on the Kuala Lumpur Stock Exchange (KLSE)
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Date
2004-02
Authors
MUSIR, MOHAMAD NAZRI
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Abstract
Share repurchase is another alternative besides dividends for companies to distribute their
cash. Past research have found that the share repurchase activities are done during rising
markets and also have signaling impact whenever an announcement is made and it varies
due to the size of the company. Share repurchase activities is considered quite a new
phenomenon in Malaysia and our study is basically to find out whether the trend of share
repurchase activities and the impact of announcement date as well as size is the same as
past research done in overseas market. Our study period from October 1999 to October
2003 have found that there were 134 companies practicing share repurchase during this
period. The trend of share repurchase in Malaysia on quarter to quarter basis were found
t6 be the same as overseas which is the activities are more during an uptrend as compared
to downtrend. The AAR on announcement date was a positive 0.3% and the CAR for the
31 day window was 5%. Smaller capitalization companies recorded a positive AAR of
0.3% as compared to bigger capitalization companies which registered a -0.03% on
announcement date. The returns however for the 31 day window was the reverse where
bigger capitalization companies registered an AAR of 3.4% as compared to 2% for
smaller capitalization companies. Although the findings are not significantly different
from zero, we can still conclude that there are still abnormal returns whenever a company
announces share repurchase and the abnormal returns differs due to the size of the
company.
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The Practice of Share Repurchase and Its Signaling Impact , on Stocks Quoted on the Kuala Lumpur Stock Exchange (KLSE)