The Impact of Share Buyback Announcement to Stock Return and Market Return

Abstract

Share buyback or share repurchase is a form of corporate actions conducted by issuers to buy their shares back from existing shareholders. One objective of share buyback program is to return excess cash to shareholders besides dividend option. PT Telekomunikasi Indonesia, Tbk (Telkom), whose stock is one of the blue chip stocks in Indonesia Stock Exchange (BEI), decided to choose share buyback and has conducted 4 share buybacks programs within period of 2006 to 2012. The purpose of this research is to analyze the impact of Share Buyback Announcement to stock return and market return. Market return was analyzed since the object of this research, Telkom, has relatively high portion in BEI capitalization. This research applied Event-Study with estimate and windows period of 40-days before and 20-days after Announcement Date. Statistical experimental used t-Test Wilcoxon Signed Ranks Test with significance level of 0.10. The result of this research shows that there is no significant difference in stock return and market return before and after the announcement of Share Buyback