Centro de Documentacion de Fundación MAPFRE - The Wealth and information effects on insurers' open market stock repurchase announcements

MAP20071505369

The Wealth and information effects on insurers' open market stock repurchase announcements / Patricia Born, Camelo Giaccotto, Titos Ritsatos

This article examines the use of an increasingly popular method of cash disbursement in the insurance industry: stock repurchase programs. Using an sample of stock repurchase announcements between 1981 and 1997, we examine the motivation for stock purchase , estimate the market reaction to the repurchase announcement, and evaluate the magnitude of the reaction as it relates to particular insurance industry and firm characteristics. We examinate the abnormal returns around the announcement day and find a significant positive wealth effect associated with repurchase announcements - a result that is consistent with that of other studies of both nonfinancial and financial firms . However, we suspect that the nature of the insurance product and the highly regulated status of the insurance industry might serve to mitigate the magnitude of an announcement effect. In fact, we find that the effect for all insurers smaller than that obtained in samples of industrial firms. Finally, we examine the relationship between the magnitude of announcement effect and various firm characteristics and test the significance of information signaling and Jensen's free cash flow theories in the insurance setting

En: Risk management and insurance review. - New York : The American Risk and Insurance Association. - Vol. 7, nº 1 Spring 2004 ; p. 25-40

1. Mercado de seguros . 2. Empresas de seguros . 3. Estrategia empresarial . 4. Distribución de seguros . 5. Márketing de la empresa de seguros . I. Giaccotto, Carmelo . II. Ritsatos, Titos . III. Título. IV. Título: Risk management and insurance review.