Equity undervaluation and signaling power of share repurchases with legal restrictions

Jung Hua Hung, Yi Pei Chen

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


This paper analyzes share repurchase programs, which are subject to specific legal restrictions in Taiwan, to determine whether the unique item repurchase price range conveys information regarding the degree of undervaluation and future prospects of a firm. We find that the price range conveys such information, not only about the past, but also the future. Companies with a higher upper bound of the repurchase price range experience better abnormal returns than do companies that do not. The lower bound of the price range does not efficiently convey the undervaluation effect, owing to the exemption clause in the announcement. Finally, the announced price range, in turn, conveys favorable information about the repurchasing firm and is a more powerful signal of future prospects than is the legal price range.

Original languageEnglish
Pages (from-to)101-115
Number of pages15
JournalEmerging Markets Finance and Trade
Issue number2
StatePublished - 1 Mar 2010


  • Price range
  • Repurchases
  • Signaling
  • Undervaluation


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