Share price response to open market share repurchase announcements on the JSE Securities Exchange

Abstract

ABSTRACT Research conducted locally and internationally has yielded mixed results on share price reaction to open market share repurchase announcements. This research report examines share price reaction to open market share repurchase announcements for securities listed on the JSE Securities Exchange for the period 01 January 2005 to 31 December 2011. The global financial crisis occurred within this period and cannot be ignored; therefore its impact on share price reaction is also examined. Historical daily returns for securities that announced open market repurchases and the all share index were collected; and the event study methodology was used to examine the share price reaction and the impact of the global financial crisis on open market share repurchase announcements for securities listed on the JSE Securities Exchange for the period 01 January 2005 to 31 December 2011. This study found the JSE Securities Exchange to be an efficient capital market in the semi-strong form, with more share repurchase announcements in the pre-financial crisis period than in the financial crisis period. The study analysed 90 open market share repurchase announcements and found positive market reaction to share repurchase announcements; however the study did not find any significant abnormal returns to open market share repurchase announcements.