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Asian Review of Financial Research Vol.18 No.2 pp.67-99
The Wealth Effects of Stock Repurchases on Shareholders and Bondholders
Mookwon Jung Kookmin University
Key Words : 자사주매입,채권자의 부,자기등급 채권,기업가치신호가설,부의 이전가설


This study investigates the wealth effects of open market stock repurchases on shareholders and bondholders and tests the relative importance of the signaling hypothesis and wealth transfer hypothesis regarding the motivation of stock repurchases. The empirical results show that the CAR around the announcement of share repurchases is 2.70%, while the YSC (Yield Spread Change) is -0.13%, which implies that both values of stocks and bonds increase at repurchase announcements. In addition, the correlation between the shareholder's wealth and the bondholder's wealth is positive only in the firms with speculative-grade debt. However, considering that both shareholders' and bondholders' wealth increase even in the firms with investment-grade debt, the signaling hypothesis seems more persuasive than the wealth transfer hypothesis.
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