We analyze the final result of each repurchase program to measure the extent to which program fulfilled the original declared objective. In most cases, the announcement of share repurchase program was designed to deliver costless information about stock underpricing. (we report the analysis of 6 months stock performance prior to the announcement date) and was followed by rather sluggish repurchase actions. Next, we check the credibility of open market share repurchase programs by measuring the signaling effect among groups of small, medium and large companies. This is because of the assumption, that the credibility of companies declarations improves with company size.
Event study analysis is used to measure the cumulative abnormal returns in different investment periods following the 107 stock repurchase announcements. The natural choice for the definition of abnormal return was the return above past average returns. Additionally, we use market adjusted abnormal return. To analyze our results in different capital market phases, we create portfolios in compliance with the calendar method. Generally, we find no support for long-term value creation after the open market stock repurchase program announcement in the analyzed population.
In the short-term, a small but statistically significant abnormal return is delivered. This survey captures different phases of Polish capital market between 2005 and 2010. We also observe that cumulative abnormal returns following a repurchase programs announcement depend on the capital market phase as well.