The intra-industry effect of share repurchase deregulation

Evidence from Taiwan

Shao-Chi Chang, Jung Ho Lai, Chen Hsiang Yu

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

Share repurchases were deregulated in Taiwan in 2000. The regulatory provisions and the government's stated aim of market stabilization provide a setting in which share repurchases are exclusively motivated by undervaluation. This study investigates if deregulation of share repurchases is an effective method of market stabilization by investigating the intra-industry effects of repurchase deregulation in Taiwan. We find that repurchasing firms and their corresponding rivals both experience strong value creation upon the repurchase announcements. The evidence suggests that the intra-industry effect of share repurchases is negatively associated with rivals' firm size, and positively associated with the announcing firm's abnormal return, the size of share repurchases and the similarity of business operation between rivals and repurchasing firms. These findings hold even after taking into account other effects that could influence the valuation of the rival firms.

Original languageEnglish
Pages (from-to)251-277
Number of pages27
JournalReview of Pacific Basin Financial Markets and Policies
Volume8
Issue number2
DOIs
Publication statusPublished - 2005 Jun 1

Fingerprint

Taiwan
Industry effects
Deregulation
Share repurchases
Repurchase
Stabilization
Undervaluation
Abnormal returns
Government
Firm size
Value creation
Announcement

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

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The intra-industry effect of share repurchase deregulation : Evidence from Taiwan. / Chang, Shao-Chi; Lai, Jung Ho; Yu, Chen Hsiang.

In: Review of Pacific Basin Financial Markets and Policies, Vol. 8, No. 2, 01.06.2005, p. 251-277.

Research output: Contribution to journalArticle

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