Confidence on Credit: A Study on the Role of Financial Distress in Shaping the Credibility of Share Repurchase Announcements

Sammanfattning

This thesis examines whether the informational value of open-market share repurchase announcements depends on firms' financial condition and the unexpectedness of the announcement. Using a panel of U.S. firms from 2016 to 2024, we combine an event-study framework with cross-sectional time-series regressions to test whether financial distress, measured by the Altman Z-score, and long periods of repurchase inactivity amplify short-term announcement-period abnormal returns. Contrary to signaling-based predictions, we find no evidence that distress or unexpectedness strengthens market reactions. However, probit results show that unexpected repurchases during volatile periods are more likely to be initiated by financially healthy firms. In doing so, the thesis not only extends prior work on repurchase signaling but also opens a path for future research to disentangle how evolving market structures, regulatory constraints, and firm-specific conditions jointly shape the informational role of repurchase announcements.