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|Other Titles:||The Announcement Effect of Capital Reduction to Cover Losses, Cash Refund Capital Reduction, and Stock Repurchases|
Wang, Ma-Ju;Hsiao, Chun-Yu
Capital reduction to write off accumulated losses;Cash refund capital reductio;Capital reduction by stock repurchases;Abnormal return
|Issue Date:||2016-06-01 14:23:08 (UTC+8)|
This study explores the market announcement effect of three types of capital reduction, namely capital reduction to write off accumulated losses, cash refund capital reduction, and capital reduction by stock repurchases. Although capital reduction to write off accumulated losses has negative market reactions at announcement, the market reaction improves afterwards. In a bear market, cash refund capital reduction can demonstrate robust corporate health and strong financial position. Stock repurchases is the best way for companies to demonstrate their confidence in the company. All three methods result in improved long-term stock price performance after the announcement. The ratio of capital reduction has a negative (positive) influence on companies adopting capital reduction to write off accumulated losses (cash refund capital reduction), but does not affect companies adopting capital reduction by stock repurchases. The decision on capital reduction is not aimed at adjusting the company’s capital. Moreover, investors do not react positively to additional expenditure on R&D for companies adopting capital reduction to write off accumulated losses. For companies adopting cash refund capital reduction, investors react more positively when directors and supervisors hold more outstanding shares and when the profit distribution right decreases. For companies adopting capital reduction by stock repurchases, market reaction tends to be more positive as the pledge ratio by directors and supervisors is lower.
International Journal of Accounting Studies
|Appears in Collections:||[會計評論] 期刊論文|
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