SHARE PRICE REACTION TO OPEN MARKET SHARE BUY-BACK ANNOUNCEMENTS IN SOUTH AFRICA

Abstract

International studies have revealed a favourable market reaction, in terms of positive cumulative abnormal returns, to open market share buy-back announcements. The information signalling hypothesis is largely the attributor of share price response to share repurchases information. Returns of between 2% and 4% have been found in the short-term with repurchase activity in the US accounting for $180 bn annually in terms of transaction value. This Research Report analysed the returns of ordinary shares of companies listed on the JSE Securities Exchange who made open market share buybacks under a general authority. There were 107 share repurchase transactions analysed in this study with no sign of significant abnormal returns discovered in a comparatively small market where only R10 bn worth of open market repurchase activity was studied.