Share price reaction to stock split and stock repurchase

Karoushi, Sayed Ali Barzin (2014) Share price reaction to stock split and stock repurchase. Masters thesis, Multimedia University.

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Abstract

This study examines the Malaysian stock market‘s reaction to stock split and stock repurchase announcements. The study is focused on stock split announcement and share repurchase announcement separately; 2009 -2013 duration for stock split and 2010 – 2013 for stock repurchase (share buyback) announcements. The data was extracted from Bursa Malaysia‘s official website, Bloomberg and securities.com. This study used in total 82 announcements which are 34 announcements for stock split (all stock split announcements during 2009-2013) and 48 stock repurchase announcements (all announcements from 2010 to 2013) from listed companies. The event study methodology with market model adjustment to compute the abnormal return has been chosen as the research method. The result of this study is compatible with the signalling hypothesis. The analysis of sample shows a significant positive reaction of stock price to stock repurchase and stock split announcement around the announcement day, which is the event window. This research shows that the Malaysian stock market had a positive reaction to stock split and stock repurchase announcements. In addition, in accordance with the Efficient Market Hypothesis (EMH), this study finds that the Malaysian stock market is in a weak efficiency form because of probable insider trading due to insider information of the firm. Investors considered stock split announcement and stock repurchase announcement as good news and they had a positive reaction to this news. Results of this study can be beneficial to investors, companies and the Malaysian stock market in relation to public announcements in the form of stock split and stock repurchase announcements.

Item Type: Thesis (Masters)
Additional Information: Call No.: HG5750.6.A3 S29 2014
Subjects: H Social Sciences > HG Finance
H Social Sciences > HG Finance > HG4501-6051 Investment, capital formation, speculation
Divisions: Faculty of Management (FOM) > MBA Programme
Depositing User: Ms Nurul Iqtiani Ahmad
Date Deposited: 17 Apr 2014 07:51
Last Modified: 01 Jul 2015 02:53
URI: http://shdl.mmu.edu.my/id/eprint/5438

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