Background: There is much written in current literature documenting that share price increases occur for companies that announce a stock buyback, and several different theories have been presented to explain these. Prevalent among these is the positive signaling that company management is sending to investors, which would cause others to buy the shares as well. However, there is little or nothing written concerning the share price behavior for companies with multiple buyback announcements, and if the frequency of these announcements affects the size of the share price increase.
Data/Methods: This researcher investigated over 1,800 different share buyback announcements during the 10-year period 2005-2015, for member companies of the Standard & Poor’s 500 Index companies (S&P 500). Various public sources and subscription services were utilized to obtain evidence of the buyback announcements, but ultimately, the author traced each of these buybacks (over 1,800) back to each company’s website for individual confirmation of the buyback announcement. This became a very tedious process but was necessary to confirm each official buyback announcement to a company source. The author then selected the 26 companies with at least 9 buyback announcements in this 10-year period. One company (Autozone) had 19 different buyback announcements during this span. Once the data was gathered, individual stock prices and S&P 500 Index numbers were collected for several dates around the buyback announcement date, and multiple regression methods, including ordinary least squares linear regression, were used to analyze the data.
Results: The author did not find evidence of a law of diminishing returns with multiple stock buyback announcements. Instead, 20 of the 26 companies actually had larger share price increases with multiple buyback announcements. The author then investigated other potential causes for the increasing returns.
Policy Implications: This paper indicates that during 2005-2015, companies were not penalized with lower share price increases for having multiple stock buyback announcements. If this trend were to continue into the future, companies need not consider the frequency of share buyback announcements when deciding to implement a share repurchase plan.