none

Previous empirical research has documented that share repurchase are associated with positive significant abnormal returns. This association is rationalized on the basis that share repurchase announcement acts as a signal of future prospects. This research aims to investigate the existence of intra-industry transfers where share repurchase announcement of one firm is extrapolated to other companies in the same industry portfolio. We examine intra-industry stock price response to the share repurchase announcements of 218 Taiwan firms spanning August 2000 to October 15, 2001. The average and cumulative abnormal returns for announcing firm and rivals are positive. Regression results indicate that contagion effect dominates competitive effect; firms with similar cash flow and highly stock price correlation to the announcing firms enjoy more pronounced cumulative abnormal returns.

Aharony, J., and I. Swary, 1980, “Quarterly Dividend and Earnings Announcements and Stockholder Returns: An Empirical Analyzing” Journal of Finance, 35, 1-12
Akhigbe, Aigbe; Madura, 1996, “ Intra-Industry Effects of Voluntary Corporate Liquidations ”, Journal of Finance and Accounting, 23, 915-929
Ambarish, Ramasastry, Kose John, and Joseph Williams, 1987, “ Efficient Signaling with Dividends and Investments”, Journal of Finance, 42, 321-343
Asquith, P., and D. Mullins., 1983, “ The Impact of Initiating Dividend Payments on Shareholders’ Wealth”, Journal of Business, 56, 77-96
Atiase, R., 1985, “ Predisclosure information, firm capitalization, and security price behavior around earnings announcements”, Journal of Accounting Research, 23, 21-36
Barth, Mary E.; Kasznik, Ron, 1999, “Share Repurchase and Intangible Assets ”, Journal of Accounting and Economics, 28, 211-241
Bartov, Eli, 1991, “Open-market Stock Repurchases as signals for earnings and risk changes ”, Journal of Accounting and Economics, 14, 275-294
Choi, Dosoung, 1997, “The Differential Information Conveyed by Share Repurchase Tender Offers and Dividend Increases”, The Journal of Financial Research, 20, 529-543
Comment, Robert; Jarrell, Gregg A., 1991, “The Relative Signaling Power of Dutch-Action and Fixed-Priced Self-Tender Offers and Open-Market Share Repurchases”, The Journal of Finance, 46, 1243-1271
Dittmar, Amy K., 2000, “Why Do Firms Repurchase Stock”, Journal of Business, 73, 331-354
Docking, Diane Scott and Hirschey, Mark and Jones, Elaine, 1997, “ Information and Contagion Effects of Bank Loan-Loss Reserve Announcement.” Journal of Financial Economics, 43, 219-239
Dann, Larry Y.; Masulis, Ronald W.; Mayers, David, 1991, “Repurchase Tender Offers and Earnings Information”, Journal of Accounting and Economics, 14, 217-251
Erwin, Gayle R., 1998, “The Intra-Industry Effects of Open Market Share Repurchases: Contagion or Competitive? ”, The Journal of Financial Research, 21, 389-406
Guay, Wayne; Harford, Jarrad, 2000, “The Cash-Flow Permanence and Information Content of Dividend Increases versus Repurchases ”, Journal of Financial Economics, 57, 385-415
Ikenberry, David; Masulis, Josef Lakonishok, and Vermaelen, Theo, 1995, “ Market Undervaluation to Open Market Share Repurchases ”, Journal of Financial Economics, 39, 181-208
Jagannathan, Murali; Stephens, Clifford P and Weisbach, Michael S, 2000, “ Financial Flexibility and the Choice Between Dividends and Stock Repurchases ”, Journal of Accounting and Economics, 57, 355-384
Lang, L., Litzenberger, R., 1989, “ Dividend announcements: cash flow signaling vs. free cash flow hypothesis”, Journal of Financial Economics, 24, 181-191
Lang, Larry H. P.; Stulz, Rene M., 1992, “ Contagion and Competitive Intra-Industry Effects of Bankruptcy Announcements: An Empirical Analysis”, Journal of Financial Economics, 32, 45-61
Firth, M. A., 1976, “The Impact of Earnings Announcements on the Share Price Behavior of Similar Type Firms ”, Economic Journal, 86, 296-306
Hazen, Tomas, 1977, “Transfer of Corporate Control and Duties of Controlling Shareholders – Common Law, Tender Offers, Investment Companies – and a Proposal for Reform”, University of Pennsylvania Law Review, 125, 1023-1067
Ofer, Aharon R. and Thakor, Anjan V., 1987, “A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends ”, Journal of Finance, 42, 365-394
Hertzel, Michael; Jain, Prem C., “Earnings and Risk Changes Around Stock Repurchase Tender Offers ”, Journal of Accounting and Economics, 14, 253-274
Nanda, Vikram, 1991, “On the Good News in Equity Carve-Outs”, Journal of Finance, 46, 1717-1737
Nohel, Tom; Tarhan, Vefa, 1998, “Share Repurchases and Firm Performance: New Evidence on the Agency Costs of Free Cash Flow”, Journal of Financial and Economics, 49, 187-222
Ronald, W. Masulis, 1980, “Stock Repurchase by Tender Offer: An Analysis of the Causes of Common Stock Price Changes ”, The Journal of Finance, 35, 305-321
Shen, Yang-Pin, 2001, “Subsidiary’s Trading of Parent Stocks and the Signaling Hypothesis”, working paper
Slovin, M.B., Sushka, M.E., Bendeck, Y.M., 1991, “ The Intra-industry Effects of Going-private Transactions”, Journal of Finance, 46, 1537-1549
Stephens, Clifford P. and Weisbach, Michael S., 1998, “Actual Share Reacquisitions in Open-Market Repurchase Programs”, The Journal of Finance, 46, 313-333
Thompson, R, 1985, “Conditioning the Return-Generating Process on Firm-Specific Events: A Discussion of Event Study Methods ”, Journal of Financial and Quantitative Analysis, 20, 151-168
Vermaelen, T., 1981, “Common Stock Repurchases and Market Signaling: An Empirical Study”, Journal of Financial Economics, 9, 138-183