Are Buybacks Good for Long-Term Shareholder Value? Evidence from Buybacks around the World

Abstract

Using a sample of over 9,000 buyback announcements from 31 non-U.S. countries, we find support for the results of studies based on U.S. data: On average, share repurchases are associated with significant positive short- and long-term excess returns. However, excess returns depend on the likelihood of undervaluation and the efficiency and liquidity of equity markets. In contrast to findings in U.S. markets, we do not find that these long-term excess returns are simply a compensation for takeover risk or have become less significant in recent years.

A global analysis of Private Investments in Public Equity

“…Daily stock prices for US firms are collected from the Centre for Research in Security Prices (CRSP) and for non-US firms from Thomson Reuters 7 in local currency to avoid the potential effect of currency changes. To ensure the quality of the data employed from Thomson Reuters we follow a two-step cleaning process as suggested by Manconi et al (2017). First we remove all non-trading days.…”

“…" Table 1 goes Thomson Reuters is reported in several studies to have poorer quality stock data compared to CRSP (Ince and Porter, 2006;Manconi, Peyer and Vermaelen, 2017). Therefore, we collect US stock data from CRSP.…”

“…where , , is the abnormal return of a security i, in country j, on day t. , , is the logarithmic return of security i, in country j, on day t, the ̂ and ̂ coefficients are estimated based on 250 trading days before day -25 relative to the announcement date and , , is the return of the market m, in country j, on day t. We use as a market benchmark the CRSP value weighted market indices for US firms and the DataStream individual country indices for non-US firms, following global stock performance studies such as (Bris, 2005;Manconi et al, 2017). We measure the announcement returns using the window (-4, +5) days around the PIPE announcement.…”

What drives dividend smoothing? A meta regression analysis of the Lintner model

“…In recent studies, Skinner (2008), Brav et al (2005), and Leary and Michaely (2011) report evidence questioning that firms base their payout on a target dividend ratio. Whereas stock repurchases gained in importance in the US from 1980 onwards, they emerged as an alternative payout method in many non-US countries at the end of the 1990s (Manconi et al, 2017). 7 The availability of a different payout method suggest that firms might use stock repurchases to disburse temporary earnings (Jagannathan et al, 2000) leading to higher dividend smoothing.…”

Incomplete Share Repurchase Programs in Vietnam: Completion Rates and Short-Term Returns

“…Hatakeda and Isagawa (2004) find that stock prices in Japan go up in response to stock repurchase announcements. Looking at a sample of firms from 31 non-US countries, Manconi et al (2019) find that, at least on average, buyback announcements made by non-U.S. companies are followed by significant positive short-term and long-term excess returns.…”