Authors: ANGELIKI DROUSIA, ATHANASIOS EPISCOPOS, GEORGE LELEDAKIS

Title: Market Reaction to Stock Repurchase Announcements in Greece

Abstract

The paper examines the stock market reaction around the announcement of open market share repurchase programs, and the factors that affect the size of that reaction. A unique, hand-collected dataset is used, from companies whose stocks trade on the Athens Stock Exchange. Positive and statistically significant abnormal returns are observed around the announcements of authorizations share repurchase programs. Both initial and subsequent program authorizations are greeted favorably by the market. Infrequent programs experience greater market reaction. The reason for initiating a repurchase program, as stated by the company, affects the market reaction.  Most of the firms announcing an authorization of a share repurchase program do not announce a dividend change at the same time. The firms that decide to increase their dividend and to initiate a share buyback at the same time are firms with greater size, operating income and lower leverage ratio. The firms that decide a dividend decrease along with  a share authorization are not smaller in size or report operating income less than the mean repurchasing firm, but report significantly lower cash (and equivalents) than average. The effects of regulatory changes after the implementation of the European Directives concerning market manipulation are also examined.