n Investment Analysts Journal - The relationship between discretionary accruals and announced repurchase intentions : the case of the Taiwan Stock Exchange market

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Previous studies have found significantly positive abnormal returns following repurchase announcements in the Taiwanese security market, whatever the announced intention of the repurchase. The present study shows that the abnormal returns that follow a repurchase announcement when the intention is to maintain the share price is positively related to the discretionary accruals (DAs) prior to the announcement, as well as to the repurchase percentage. Moreover, these DAs are positively correlated with operational performance following the repurchase. That is, managers use the DAs to inflate earnings prior to the repurchase announcement and thus signal future favourable operational performance. However, when the announced repurchase intention is to transfer stock to employees or option holders, the abnormal returns are positively related to the repurchase percentage but not to the DAs.


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