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

Abstract

Stock repurchases have become a preferred method of distributing cash to stockholders. However, given the high level of information asymmetry and weak corporate governance as well as poor investor protection in Vietnam, many Vietnamese firms use stock repurchases as a tool to manipulate stock prices in the market. Using event study methodology and Tobit regression models, this study examines the stock price behaviors surrounding the event dates and the impact of earnings management activities prior to the stock repurchases on the completion of repurchase announcements in Vietnam. The results show that earnings management practices prior to stock repurchase programs, the percentage of intended buyback shares, and CEO characteristics have a significant impact on the completion of these repurchase programs. Moreover, most of the windows surrounding the event dates do not have any significant abnormal movement of the stock prices. A plausible explanation is that, due to weak corporate governance and poor investor protection, Vietnamese firms send lots of misleading signals through various corporate activities, especially stock repurchase programs. Thus, these signals have less meaning to investors.

Valuation Effects of Magnitude and Frequency of Share Repurchases: Indian Evidence

“…There has been a considerable amount of literature on share repurchases in the past, covering a variety of motives, such as capital restructuring, dividend substitution, surplus cash flow, managing earnings per share (EPS), increasing shareholder wealth, and deterring takeovers. EPS improvements are a primary corporate driver of stock repurchases, according to Cao et al (2020), who found a positive correlation between earnings management strategies and stock repurchases in Vietnam. Jena et al (2019) found that promoter holdings and earnings quality are negatively correlated, and Indian companies engage in opportunistic earnings management before buybacks.…”