Återköp av aktier : Effekter på aktiekursen hos företag som återköper aktier
Abstract (Summary)On the 10th of March 2000 it became legal in Sweden for publicly traded companies to repurchase its own stocks. A reason for this according to the law writers was to share profit this way, giving greater flexibility and the possibility to create a better capital structure.The repurchase phenomena ha increased on popularity in Sweden, following what has previously happened in USA. For this reason, we decided to study the effect that the repurchase has on the share price in the sort term as well as in the long term. We also decided to study the motives that were driving the buy back.Stock repurchases has been common in the US for a number of years and several studies exist on the topic. These studies show a limited increase in share price is visible in conjunction with the announcement. Several studies also show that there is a significant long-term increase in stock price compared to relevant indexes following the buyback.We have studied the short- and long-term effects by using the event study technique. When studying the long-term effects, 3 years, we have used the holding-period-return method. We have compared three industry segments being Investment companies, Real estate companies and trading companies. Repurchases occurring in these segments during 2000 and 2001 has been studied.Our conclusion is that in the short term, a small and varying increase in stock price is occurring. This increase is not considered significant in any of the tree segments. Within each segments, big variations was observed. This fact makes it more difficult to compare the numbers. The initial 2 day effects where: Investment companies +3,2%, Real estate companies +1,75%, and trading companies +0,9%.However, in the long-term, the companies buying back its own stock has a significant better development of the share price. The companies in the Investment segment increased 40,6 % more compared to the segment index during three years. Corresponding number or Real estate and Trading companies was 19,8 & and 14,1%. We also conclude that the initial difference between the segments gets emphasized over time.The most common motive from the companies’ management was that they perceived the stock being under valued and thus a good investment. Also these reasons are in line with the findings in the US.
Source Type:Master's Thesis
Date of Publication:08/05/2005