• The Self-evaluation from Share Repurchase Plan and Manipulation

Abstract

Share repurchase plan (SRP) provides an opportunity for the firms who try to convey their own self-evaluation attitude about the intrinsic value. However, identify the signal is a difficult task for uninformed investors, thus SRP may hide the manipulation purpose of firms. This paper investigates how the firms interfere in stock market by arranging SRP, and observes the samples that unilateral revealed existence of serious undervalued problems. The empirical results show that the firms with overoptimistic self-evaluation have three distinct features in SRP event. First, the outcomes of executing share buyback would be far from the program. Second, reviewing the theoretical return before announcement period, it detected no specific evidence to demonstrate the existence of undervalued problem. Finally, the per- formance could beat the benchmark, and consequently the market valuation would be adjusted in terms of the signal that SRP revealed. But the achievement was limited to the predetermined execution period only.

Keywords: share repurchase plan (SRP), self-evaluation, manipulation, undervalued,performance