Share Repurchases and Stock Returns Observation from Sequential Execution Records

Transcription

1 Share Repurchases and Stock Returns Observation from Sequential Execution Records ABSTRACT In this study, we argue that when firms conducting a corporate event multiple times send signals to the public, investors reacting to this current announcement are affected by the past experience of announced firms actual repurchase. Using Taiwanese officially detailed execution process data set of repurchasing firms required to publicize after two months, we take the accurate number of execution rate to evaluate the relation with actual share repurchase and stock returns. Examining the different extent of current execution rates and drawing out the first-time announcing effects, we find that stock performance following share repurchase programs is correlated to previous execution records. Thus, based on investors perspectives, we find stock markets are rationally depended on prior and past experience of share repurchase execution rate to identify new announcing signals. In addition, we also investigate the relationship with the pre-announcement stock returns, stock performance after announcing, and actual repurchase. It is found that the higher the past returns are, the better the subsequent performance of announcing firms, even under the lowest execution rate. Therefore, for firm managers, it seems to be a possible way to boost their stock returns at little or no cost by combining the favorable signaling effect of share repurchase with positive price momentum strategy. Keywords: share repurchase; execution records; management credibility; stock performance - 1 -

2 I. Introduction Share repurchases have become one of the most popular financial management tools for companies. The empirical findings reported in previous studies show that announcements of stock repurchase decisions are associated with positive abnormal returns (e.g. Vermaelen (1981); Bagwell and Shoven (1989); Comment and Jarrell (1991); Ikenberry, Lakonishok and Vermaelen (1995)). In Taiwan, share repurchase programs have been implemented increasingly since the deregulation of Security Exchange Law on August 2, allowing firms to buyback their stocks from the open market. After six years, there have been 1337 open market share repurchase announcements made by 387 firms in the Taiwan Stock Exchange market. More than half of all listed firms have used this program and most of them have repurchased twice or above. The recurring event of share repurchase with the same company conveys useful information for market investors and firm managers. It is reasonable to assume that investors can learn the motives of share repurchase from the past experience to judge the true or false signals. Because firms with good reputation to actually buyback their stocks are likely to be considered credible companies, their prior truthful signals make the market more confident and reliable to response their share repurchases announcements. On the contrary, if firm managers develop reputation of false signals, next time they will get discounted effects for their implicitly deceptive intentions. In the US and Taiwan, there is no commitment for announcing firms to fully complete their planned repurchase programs. Therefore, the record of previous announcements offers the market an indicator to distinguish between the trustworthy and deceptive information. In this study, we attempt to figure out the relationship with sequential execution records and stock returns on share repurchase programs. According to observing the following stock returns under 6 kinds of current execution rate, we find market s reactions are unclear. However, after drawing the first-time announcing firms from the original sample, we find that the first-time announcing effect outperforms the non-first-time. This result means, excluding the first-time announcing effect, the stock market seems to be efficient. Furthermore, we rearrange our data by firms prior and past average execution rate to see how investor responses to good and bad records of actual repurchase. The result shows that even in the short or long time, stock returns are gradually increasing with the higher previous execution rates. It represents that the market gives more favorable reactions to credible firms keeping promise to buyback their shares as planned. In other words, investors will take previous similar experience, - 2 -

3 past records of execution rate, into consideration of reacting successive repurchased announcements. Finally, we investigate the relationship with the pre-announcement stock returns, post-announcement stock performance, and execution rate. It is found that the higher the past returns are, the better the subsequent performance of announcing firms. This finding also provides the evidence that less actual repurchased firms with superior performance over the pre-announcing window period are likely to have the highest returns following share repurchase announcements in the long run. From the perspectives of firm managers, it is possible to earn their excess stock returns by combining the signaling effect of repurchase with positive price momentum strategy in the long run. 1. Share Repurchase Motivations Ⅱ.Literature Review Share repurchases are similar to dividends because both are used to distribute cash back to stockholders and both are considered as a positive signaling. In past literatures, there are several reasons for buyback motives such as the signaling hypothesis or undervaluation hypothesis (Ikenberry et al. (1995); Baker et al. (23); Bra et al. (25)), the free cash flow hypothesis (Jensen (1986), Stephens and Weisbach (1998)), defensive strategy to avoid takeover (Bagwell (1991); Hodrick (1996)), adjusting optimal leverage ratio (Hovakimian, Opler and Titman (1996)), substituting for dividends (Masulis (198); Dann (1981)), expropriating the bondholder s wealth (Masulis (198); Vermaelen (1981)), and preventing dilution associated with the exercise of managers stock options (Dunsby (1994); Jolls (1996)). However, if announcing firms fail to buyback any share as they promised before, what is the meaning to these repurchased motivations? Without the evidence of actual repurchase activities, how can firms fulfill their announced repurchased purpose? What is the intention of firm managers sending a false signal to buyback? The following discussions provide lately advanced literatures about the actual repurchase activities. 2. Actual Repurchase No matter what countries repurchase regulations, firms are not committed to fully complete original buyback plans, so it is possible for firms implementing share - 3 -

4 repurchases to raise their stock price at little or even no cost. However, without sufficient amount of repurchasing stocks, there is little evidence to prove the buyback motivations, such as changing capital structure, redistribution of excess cash flow, anti-takeover activity, and personal tax saving. As a result, more recently, a growing literature provides some relevant studies of stock buyback conditioned on considering whether firms actually repurchase or not. For example, in the US, Stephens and Weisbach (1998) measure actual open-market share repurchase by using the quarterly decrease in firms outstanding shares as a proxy for the number of really repurchased shares. Chang, Chen, and Chen (26) estimate the amount of actual repurchase by several different measurements like monthly decreases of firms stocks from CRSP database, quarterly drop of firms shares reported in Compustat, and dollars spent on requiring stocks by various calculated ways in a given quarter. Unlike the US, other countries regulate firms to implement the share repurchase more stringent and need them to publicize the repurchasing processes before and after the announcement day. Consequently, because of more disclosure requirement than American, some countries provide precise and detailed information on repurchasing programs, mainly including the execution procedure. More importantly, actual repurchase is often regarded as the key issue of must-be declared items in varied countries. For example, Zhang (22) find a significantly positive abnormal return of 5% surrounding share repurchase announcements in Japan. The data of his research shows that 75% of Japanese companies accomplish 9% of their repurchased targets within less than a year. Besides, in France, whose regulations of share repurchase are released since 1998, Ginglinger and Hamon (27) investigate the relationship of timing of actual repurchases and stock liquidity which is measured by bid-ask spread from 36,848 repurchase activities made by 352 firms over a 3 years period. Similarly, using complete and timely actual daily share repurchase data, Zhang (25) investigates Hong Kong stock price performance surrounding actual share repurchases. It is found that repurchasing firms seem to exhibit no superior excessive performance over longer horizons under actual share repurchases. Take Canada for another example, McNally and Smith (27) explore the questionable issue of whether public investors can employ replicated strategies following firms disclosed repurchase trades to get abnormal returns. Canadian unique data set of firms disclosed actual repurchase trade gives more meaningful insight into share buyback programs. By and large, all studies mentioned above show that empirical results related to share repurchase are under the premise of firms actual implementation. Different from more free and less regulated requirements in the US, Taiwan, like the other countries, has strict repurchasing rules

5 According to the Securities and Exchange Law, Taiwanese public listed firm repurchasing its own stocks should, within two days of the day following the resolution made by Board of directors, announce and declare some detailed information to Securities and Futures Commission (SFC). Although firms have new alternatives to purchase their own stocks back in the open market, there are still some limitations which are regulated by the government to restrict repurchasing firms actions such as repurchasing volume, range of repurchasing prices, scheduled time, and so on. After the expiration date of two months period within five days of completion of the repurchase, firms are required to submit a formal report to the SFC and publicize the actual buyback progress, including repurchased quantity and average buying price. 3. Execution Rate in Taiwan Stock Market Taiwan s detailed repurchased data revealed by announcing firms provides the accurate completion rate of share repurchases, which is measured by the actual number of repurchased shares across the buying period divided by announced number to be repurchased shares prior to the announcement. The execution rate represents significantly economical implications for both market investors and firm mangers. Since the execution rate can be viewed as the extent of actual repurchase, past studies only focus on the stock performance with current completion level following announcing share repurchase. However, until the expiration day, market investors have no idea of how many stocks have been repurchased by announcing firms. As the announced information releases, it is hard to identify the true or false signal to actually buyback. So, the observations of the current completion rate are late and not enough for investors to make decisions. It is reasonable to make assumptions that investors will take the past records into account when firms make the repurchasing announcement. Except recent working paper by Chang, Chen, and Chen (26), taking the prior repurchased experience into consideration, there is little research using the past execution rate as the proxy to assess the credibility of announced firms signaling. However, in Chang et al. (26) s study on the US market, the repurchased amount estimated by varied measurement is not as accurate as Taiwan s actual buyback. Generally speaking, the evidence on Taiwan market s exact execution rate of share repurchase provides more valuable perspectives to study the investors impression about the repurchase activities

6 Ⅲ.Data and Methodology 1. Data The sample of this study is extracted from two main sources: the Share Repurchase Databases on Market Observation Post System website1 of the Taiwan Stock Exchange Corporation for confirming open market share repurchase announcements and the Taiwan Economic Journal (TEJ) Data Bank for collecting the stock returns of the announcing firms. To be included, each firm must be required at least 14 days stock return records before the announced date and more than 12 days stock returns after the announced date. After eliminating insufficient information about repurchased firms, the final sample consists of 1337 open-market repurchase programs made by 387 companies from August 2 to August 26. Since this study s purpose is to observe the relationship of stock performance and actual repurchase, at first, we sort our sample into 6 scales by current execution rate, namely %,.1~24.99%, 25.~49.99%, 5.~74.99%, 75.~99.99%, and 1%. The execution rate is defined as the ratio of actual buyback amount to initially announced shares for repurchase. Because we want to see the relationship with past repurchasing records and sequential stock performance following the announcement, we rearrange our original full samples by removing the first announced events, and then we obtain new samples of 953 announcements which are made by firms two times above. Firms with past average % means they never repurchased any one share as planned, on the contrary, firms with past average 1% records represents they keep their promises every time and constantly have good reputations for announcing repurchase activities. 2. Methodology 2.1 Event Study We use event-study methodology to measure the average daily abnormal returns (ARs) of the repurchasing firms. Following Mikkelson and Partch (1986), we take the market model to capture the estimates of expected returns. Abnormal returns are calculated as the difference between the actual returns and the expected returns. Our event date, t, is defined as the first publicized date of the repurchasing firms initial announcement rather than the board of directors meeting date. The estimation period covers 12 days from -14 to -21 days preceding t. Daily abnormal returns are then 1 The website address is

7 calculated over 141 event days from -2 days pre-announcement to 12 days post-announcement. We use the value-weighted All-Share Index of Taiwan Stock Exchange as the proxy for the market returns. Then, the daily abnormal returns are added up over the different event windows to get the cumulative abnormal returns (CARs) and a standardized Z statistic is used to check whether significant or not. 2.2 Measuring abnormal long-term stock returns In addition to traditional event-study method to observe the abnormal returns for each event day and cumulative abnormal returns for event window period, simple buy-and-hold returns (BHRs) is used in this study as well. We calculate abnormal returns by constructing equally weighted portfolio whose returns are computed by each firm s actual return (Rjt) minus market return (Rmt). Then, we are able to observe the long-term performance across different length of event window by cumulating abnormal returns as a whole. Beside this market-adjusted model, we further adjust risk factor of each firm ( β ) into the mentioned measurement to get j β -adjusted model observing the long-term stock performance. β j s estimated value is captured by the method of mentioned event study. IV. Empirical Results and Analysis 1. Positive Market Response Following Buyback Announcement Previous empirical studies provide abundant evidence that firms repurchase announcements are often regarded as good news by market investors. Corresponding to past literatures, the results show the whole repurchasing activities in Taiwan generate positive market response following announcement during the short-run and long-term period. This evidence is demonstrated in Figure 1 showing the anomaly phenomenon around announcing stock buyback and upward trend of subsequent stock performance. Returns(%) 12 AR CAR Event Day Figure 1. Total Sample of Share Repurchase Announcement - 7 -

8 2. Execution Rate Does Matter to Share Repurchase 2.1 Interesting Findings by Current Execution Rate Figure 2 shows the relation of actual repurchase and stock returns. The full sample is segmented to six groups by scales of current execution rate. The higher the execution rate is, the more real repurchased activities by announcing firms. Particularly speaking, we find that the non-repurchased group of % has the highest abnormal returns of 2.39%, more than fully-repurchased group of 1.63% and total sample of 1.49%, on the announcing day. Observing Figure 2, we still find that the sequential stock performance of non-repurchased firms continues to have higher returns than other groups. Why does the fully-repurchased group not enjoy the highest performance? Why does non-repurchased firm have superior advantages than others which keep their promises to buyback? Returns(%) %.1~24.99% 25.~49.99% 5.~74.99% 75.~99.99% 1% Event Day Figure 2. Comparison by Current Execution Rate We know the current execution rate in Taiwan is required to declare after two-month period following announcement. Therefore, during the initially announcing period less than 2 months, market investors have no information about actual buyback amount. It is reasonable to make the assumption that, following 4-5 trading days after announcing event day, non-repurchased firms perform worse than actually repurchased firms if investors are rational to distinguish between companies true and false repurchasing signals. However, on the contrary to our inference, there is evidence of Figure 2 showing that although non-repurchased group, %, goes down for a while over the period from day 4 to 7, it still keeps a constant uptrend in the whole event window

9 Curiously, this contradicted outcome raised some questions to our mind whether the actual repurchase really matter or not. Are there any other effects influence investors decisions to identify the execution rate of repurchasing firms? 2.2 Strong First-time Buyback Announced Effect Dominates Share Repurchase Inspired by Jagannathan and Stephens (23) s suggestion that infrequent repurchases, defined as first repurchase program within 5 years, receive a much stronger positive returns than frequent ones, we attempt to dissect the full samples into first-time and non-first-time repurchase activities. As shown in Figure 3, first announcement effect apparently outperforms non-first announcement effect. Although both repurchases are popularly favored by the market, the ARs surrounding event day or the CARs during the different windows represent that first-time share repurchase announcement by firms has more excess returns in the short and long run. Returns(%) Event Day Figure 3. Comparison by First-time vs. Non-first-time Announcement All First Non-First Since we get the conclusion that share repurchase announcement appears to be viewed favorably by investors for the first impression, subsequently, we subdivide each category of current execution rate into first vs. non-first announcement groups. Comparing with these two kinds of announcements for each category, Figure 4 draws stock performance of first-time announced firms under various levels of current execution rate. Obviously, all six sub-groups have the similar patterns, that is, the gradually positive uptrend. The finding means that first-time share repurchase announcement signals great and fresh implications to the market regardless of the extent of actual repurchased situation. It is reasonable to support this finding that investors receiving a new signal that never happened before have no criteria to judge even the actual implementation reported after two months

10 Returns(%) Event Day First(%) First( %) First( %) First( %) First( %) First(1%) Figure 4. Comparison by Different Current Execution Rate under the First-time Announcement To support our argument that the execution record really matters, in Figure 5, we compare twice-above announced firms under 6 kinds of current execution rate. Clearly, non-first firms without buying any shares back reverse down after reaching the peak of returns around day 35. As soon as investors get the released information of no actual buyback, the following stock performance appears to go down. It implies the market seems as efficient as Efficient Market Hypothesis (EMH) says. Returns(%) 12 1 Non-First(%) Non-First( %) Non-First( %) Non-First( %) Non-First( %) Non-First(1%) Event Day Figure 5. Comparison by Different Current Execution Rate under the Non-first-time Announcement Since the first-time effect outnumbers actual repurchase, we are curious of what is the role of execution rate in market investors minds? Does the previous experience - 1 -

11 of actual repurchased announcement influence the sequential repurchasing events? 2.3 Prior and Past Average Execution Rates are the Useful Indicators for Investors After separating the first-time announcements from our original data, the remaining samples include 953 events announced by 283 firms at least twice. We sort our non-first samples into 6 levels by prior repurchased records. The first group of % means firms didn t buy back any shares last time, the second group of.1~24.99% means firms prior record of execution rate is cataloged in this interval, and so on. As shown in Figure 6, the finding represents the cumulated stock returns compared by prior execution rate. Explicitly, the trend of 1 % group is gradually rising up, while the % group s direction is unclear. Except the group of 75~99 % has higher returns as group of 1 %, the tendency of the other lines is flat in the long run. As a result, we come to an initial conclusion that the prior records of actual repurchase have crucial impacts on following stock performance. That is, market investors, based on previous signaling of truthful or deceitful companies, seems to pay more attention on firms with good reputations. Returns(%) 12 1 %.1~24.99% 25.~49.99% 5.~74.99% 75.~99.99% 1% Event Day Figure 6. Comparison by the Prior Execution Rate To verify the robustness of our initial findings, we employ another way to measure the firm s credibility by past average execution rate. Different from once record last time, we take all repurchased events occurred before into our consideration. The new indicator of firms reputation is measured by averaging past happened records of execution rate. Specially to be mentioned, the group of % represents that

12 firms always cheat investors by sending false signal of intent to repurchase, and the group of 1 % stands for good firms with always keeping their promises to buyback shares in the past. Figure 7 illustrates more clear patterns to show 1 % group deserves the highest return and last two groups, % and.1~24.99 %, receive the worst stock abnormal returns following the announcement. Returns(%) %.1~24.99% 25.~49.99% 5.~74.99% 75.%~99.99% 1% Event Day Figure 7. Comparison by the Past Average Execution Rate All in all, using past records of actual repurchased implementation as a proxy to represent company s reputation, we find investors are rational as EMH mentioned. The evidence is firmly supported our assumption that public investors will take previous similar experience, past records of execution rate, into consideration of reacting successive repurchased announcements. 3. Good Company is Always Keeping Good Performance. In addition to examine investors response to actual repurchase, it is worth to see the relation with current execution rate and subsequent stock returns from firms viewpoints. We reclassify our original full samples according to announced firms past 2 days performance of CAR (-2 ; -1). Surprisingly, not all firms experienced strong negative returns preceding announcement. This finding provides the evidence that the undervaluation hypothesis is not the only reason to explain Taiwan s share repurchase programs. In Table 1, only 348 events have strong negative CAR (-2 ; -1), less than -1%, while 157 events have strong positive abnormal returns, more than 1%, before share repurchase announcement. All results are similar for cumulative abnormal returns based on three measuring returns models, so we take the CARs to illustrate

13 our findings. A comparison of CARs across the three sub-samples yields an interesting issue about firms performance. Although we find that all firms have significant positive returns in the short and long run, firms that performed better in the past 2 days seems continue to do better than firms that performed worse. It implies that good company is always going to be good company. In spite of their past superior stock performance, share repurchase announcement helps them lasting their great performance. However, firms with past poor performance appear to acquire limited response from the market. For example, in the first column of Table 1, no matter what kinds of model we takes, the results show that past negative return of CAR (-2 ; -1) can not be recovered by future performance of CAR ( ; 12). That is, depressed companies even through repurchase announcing activities get limited reaction from market investors. Table 1. Stock Performance Following Announcement Classified by Past Stock Returns of CAR (-2;-1) CAR(-2;-1)< -1% (348 samples) -1% CAR( - 2;-1) 1% (832 samples) CAR(-2;-1)> 1% (157 samples) F-value t- value (high - low) CAR (%) ( -2 ~ -1 ) *** *** ( ~ 1 ) **.88 ( ~ 12 ) *** -5.12*** R j -R m (%) ( -2 ~ -1 ) *** *** ( ~ 1 ) *** 1.68* ( ~ 12 ) *** 1.38 R j -R m / β j (%) ( -2 ~ -1 ) *** *** ( ~ 1 ) * -.84 ( ~ 12 ) Average Execution Note: ***, **, * indicate significance at the 1, 5, 1 percent levels, respectively

14 Table 2. Stock Performance Following Announcement Classified by Current Execution Rate Conditioned on Past Stock Returns of CAR (-2 ; -1) Panel A. CAR (-2;-1)<-1% Total Sample (348 samples) High (75%~1%) (188 samples) Medium (25~75%) (17 samples) Low (%~25%) (53 samples) F-value t- value (high low) CAR (%) ( -2 ~ -1 ) ** 1.31 ( ~ 1 ) * -1.97** ( ~ 12 ) Rj-Rm (%) ( -2 ~ -1 ) *.91 ( ~ 1 ) ** -2.32*** ( ~ 12 ) *** -3.4*** Rj-Rm / βj (%) ( -2 ~ -1 ) ( ~ 1 ) ( ~ 12 ) *** Panel B. -1% CAR (-2;-1) 1% Total Sample (832 samples) High (75%~1%) (466 samples) Medium (25~75%) (228 samples) Low (%~25%) (138 samples) F-value t- value (high low) CAR (%) ( -2 ~ -1 ) ( ~ 1 ) ( ~ 12 ) Rj-Rm (%) ( -2 ~ -1 ) ( ~ 1 ) ( ~ 12 ) Rj-Rm / βj (%) ( -2 ~ -1 ) ( ~ 1 ) ( ~ 12 ) Panel C. CAR (-2;-1)>1% Total Sample (157 samples) High 75%~1%) (95 samples) Medium (25~75%) (39 samples) Low (%~25%) (23 samples) F-value t- value (high low) CAR (%) ( -2 ~ -1 ) *** -2.31*** ( ~ 1 ) ( ~ 12 ) ** -2.33*** Rj-Rm (%) ( -2 ~ -1 ) ( ~ 1 ) ( ~ 12 ) * -1.89* Rj-Rm / βj (%) ( -2 ~ -1 ) ( ~ 1 ) ( ~ 12 ) Note: ***, **, * indicate significance at the 1, 5, 1 percent levels, respectively

15 Interestingly, as shown in the last row of Table 1, we find that the group of strongly positive returns, CAR (-2 ; -1) > 1 %, has the highest current average execution rate of %, while the group of extremely negative returns, CAR (-2 ; -1) < -1 %, has the lowest value of %. Although the results of difference test, like F-statistic and t-statistic, are not statistically significant, we are still curious about the connections with execution rate and stock past performance in share repurchase activities. To provide a further discussion of the our earlier findings, under each category of CAR (-2 ; -1), we repartition announced firms into three sub-groups including high, medium, and low current execution rate. On condition of firms with poor performance 2 days ago, Panel A of Table 2 shows that subgroup of low execution rate perform better than the other two groups by varied window periods. Panel B represents no special difference in any interval time. There is little finding of any relationship with normal stock performance of firms during pre-announcing period and the amount of actual repurchase following the announcing event. In CAR (-2 ;-1) > 1 % group of Panel C, the evidence that the higher the past returns are, the better the subsequent performance is proved once again. Besides, it is obvious to see that the subgroup of low execution rate has the highest abnormal cumulative returns in 12-day intervals after announcing day regardless of measuring by which models. For instance, on the basis of the same window of CAR (; 12), firms with low execution rate hold the highest returns of % among three sub-samples. If we take the pre-announcing returns of % into consideration, the CAR (-2 ; 12) will be as high as %, the highest figure among three groups. This finding indicates that firms with better stock returns before announcing seem more easily to raise their stock price at little or no cost because of less actual repurchase. Therefore, given that firms are extremely performed well prior to announcement, whether the firms really buyback or not is no more a key issue. Following by this positive price momentum, firm managers can take share repurchase announcement as a re-enforcing signal to push their stock prices consistently going up. However, although managers have chance to enhance their stock returns, they still should attempt to keep their promises to buyback. It is because this time s execution rate record will be the next time s indicator for rational investors reactions

16 V. Conclusion There are extensive literatures discussing the related issues of share repurchase announcement. However, few studies have directly explored the relationship between repeat records of actual buyback and following stock returns, and almost no researches have used precise execution ratio as a proxy to measure the extent of actual buyback. In this study, we argue that when firms conducting a corporate event multiple times send signals to the public, investors reacting to this current announcement are affected by the past experience of announced firms actual repurchase. Using Taiwanese detailed execution process data of repurchasing firms which are required to publicize after two months, we adopt the accurate number of execution rate to evaluate the actual repurchase. Examining the extent of actually repurchased amount, we get the paradoxical result that there is little relationship of current execution rate and subsequent stock performance. However, after drawing out the first-time announcing effect from actual repurchase activities, we find that stock returns following share repurchase programs are really correlated to execution records. The prior and past average execution rate of share repurchase provides investors references to identify new announcing signals. Obviously, stock market gives more favorable reactions to firms with good reputation which promise to buyback their stocks as initially planned. As a result, firms management credibility is the key issue for investors to make judgments about the recurred share buyback announcements. In addition, we investigate the relationship with the pre-announcement stock returns, post-announcement firm performance, and current execution rates. It is found that the higher the past returns are, the better the subsequent performance of announcing firms, even under the circumstances of lowest execution rate. It seems to be possible for firms managers to boost stock returns at little or no cost by combining the favorable signaling effect of repurchase with positive price momentum strategy. It also represents that, with firms past superior stock performance, repurchase announcements help them lasting their great performance in the long run, even though firms buyback few or no stocks. On the contrary, according to our empirical findings, firms with past poor performance appear to acquire limited response from the market investors, even though announced companies have completely repurchased their stocks as promised. In sum, this study mainly investigates the association with the execution records of repurchasing firms and subsequent stock returns following share repurchase

17 announcement from viewpoints of market investors and firm managers, respectively. Despite of firm managers have chance to take advantages of momentum strategy and share repurchase announcement effects, they still should pay more attention to actual repurchase as earlier announced. It is because this time s execution rate record will be the next time s indicator for rational investors reactions

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