Authors: ANGELIKI DROUSIA, ATHANASIOS EPISCOPOS, GEORGE LELEDAKIS

Title: Long-term Market Reaction to Actual Daily Share Repurchases in Greece

Abstract

This study examines the long-term market reaction after the announcement date of actual share repurchases. A unique, hand-collected dataset is used including daily public announcements of companies whose stocks trade on the Athens Stock Exchange. Buy-and-hold abnormal returns (BHARs) are calculated relative to matched control firms than have not conducted share repurchases during the examination period. The control firms are chosen according to firm size and book-to-market-value (BTMV) ratio. We find that repurchasing firms outperform the control firms during the one-, two- and three-year period after the repurchases. We also examine the long-term stock return performance according to BTMV ratio quartiles. We observe that firms at the lower BTMV quartile perform better than the ones in the higher BTMV quartile. We further investigate the long-term performance relative to the reason for authorizing the share repurchase program, as stated by the firms on the day of the authorization. The results suggest that the long-term abnormal return is smaller when the stated reason for authorizing a share repurchase program is that the stock price is perceived as undervalued.