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Stock Repurchase Announcements the announcement date, t he fir ms’ stock prices tr ended upward slightl y to day +21. This i s consistent with the semi-strong form market efficiency h ypothesis, whic h states that the stock price reflects all publicl y available information. Results here suggest that stock repurchas e announcements illicit significant positive stock price reactions at the semi-strong level of market efficiency. CONCLUSION This study tested the effect of stock repu rchase announcements on the stock price’ s risk adjusted rate of return for a sample of 85 firms. These stocks were traded on the NYSE, AM EX, or the NASDAQ. Using standard risk adjusted event study methodology with the market model, the study analy zed 35,870 recent observations on eight y-five publicly traded fir ms and the corresponding S&P 500 market index. Appropria te statistical tests of significance were conducted. Results show a negativ e market re action pri or t o the firm s’ stock repur chase announcement and a positive reaction on and after the announcement. Findings support efficient market theory at the semi -strong form level as documented by Fama (1970). Stock repurchase announcements illicit significant positive stock price reactions at the semi-strong level of market efficiency. Specifically, for this study the announcement of stock repurchase is viewed with a m ixed signal, negative before the a nnouncement and positive afterwards. Investors appear unsure as to management’s motivation implied by the repurchase decision. Unlike previous literature on this issue, there is no consist ent positive signal associated with th e repurchase announcements observed in t his stud y. E vidence here is mixed possibly d ue to sam ple selection bias or the behavioral challenge to efficient market theory . This study suggests that the market i s not efficient with respect to announcem ents of stock re purchases in the short te rm. Results here question the strength of market efficiency and may offer additi onal evidence in support of the behavioral challenge to efficient market theory. REFERENCES Brudney, Victor. (1983). “Equal Treatment of Shareholders in Corporate Distributions and Reorganizations.” California Law Review, Vol. 71, No. 4, The Supreme Court of California (July), 1072-1133. Comment, R., and G.A. Jarrell. (1991). "The Relative Signaling Power of Dutch-Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases." Journal of Finance (September), 1243-1271. Dielman, Nantell, and Roger L. Wright. (1980) “Price Effects of Stock Repurchasing: A Random Coefficient Regression Approach.” The Journal of Financial and Quantitative Analysis, Vol. 15, No. 1 (March), pp. 175-189. Dittmar, Amy K. (2000). "Why Do Firms Repurchase Stock." The Journal of Business (July). Fama, E. F. (1970). “Effi cient Capital Markets: A Review of Theory and Em pirical Work.” Journal of Finance, Volume 25 (May), 383-417. Friedman, Louis P. (1986). “Defensive Stock Repurchase Programs: Tender Offers in Need of Regulation.” Stanford Law Review, Vol. 38, No. 2 (January), 535-594. ASBBS E-Journal, Volume 4, No.1, 2008 104
Kinsler and Bacon Marks, Kenneth R. (1976). “The Stock Price Performance of Firms Repurchasing Their Own Shares.” New York University Bulletin. Masulis, Ronald W. (1980). “Stock Repurchase by Tender Offer: An Analysis of the Causes of Common Stock Price Changes.” The Journal of Finance, Vol. 35, No. 2, Papers and Proceedings Thirty-Eighth Annual Meeting American Finance Association, Atlanta, Georgia, December 28-30, 1979 (May), 305-319. Liano, Kartono, Gow-cheng Huang, and Herman Manakyan. (2003). "Market reaction to open market stock repurchases and industry affiliation." Quarterly Journal of Business and Economics (Winter-Spring). Personal Finance. (2007). Yahoo! Finance, (April), http://finance.yahoo.com/personal-finance/glossary?gloss_ind=t. Rosenberg, Marvin, and Allen E. Young. (1976). “The Performance of Common Stocks Subsequent to Repurchase by Recent Tender Offers.” Quarterly Review of Economics and Business (Spring), 109 -113. Ross, S. (2005). Corporate Finance (Stephen A. Ross, Randolph W. Westerfield, Jeffery Jaffe. - 7 th ed.). United States: McGraw-Hill Companies. Stewart, Samuel S. (1976). “Should a Corporation Repurchase Its Own Stock.” Journal of Finance, Vol. 31, No. 3 (June), 911 -921. ASBBS E-Journal, Volume 4, No.1, 2008 105
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Mellon Bank, N.A. v. United States,
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