Mispricing stock and its impact on share repurchase and market reactions to share repurchases, an application on non-financial companies listed on the Egyptian Stock Exchange

The current research aimed to study a number of direct and interactive relationships. The direct relationships consisted of studying the relationship between the effect of mispricing shares at overvalued and undervalued on the repurchase of shares, as well as the effect of repurchasing shares on market reactions. As well as studying the interactive relationships (modifying role) of growth opportunities, dividends, and the degree of share repurchases on the relationship between share repurchases and market reactions. This was done by using a sample of non-financial companies listed on the Egyptian Stock Market during the period from 2012-2022, the number of which reached 53 companies. In order to achieve this, 6 hypotheses were developed, and the researcher relied on testing them on the use of regression analysis using the ordinary least squares method, the event study method, and multiple linear regression. The results of the statistical analysis of the data resulted in a significant positive effect of undervalued mispricing shares on the repurchase of shares. There is also a significant negative effect of overvalued mispricing shares on the repurchase shares. The research also found that there is a significant positive effect of stock repurchases on the market’s reactions to the repurchase, and that this effect decreases if there are growth opportunities for a company, as well as if the company pays dividends. The research also found that the more free cash flow spent on share repurchases (the degree of share repurchases), the lower the positive impact of share repurchases on market reactions until it reaches zero when the percentage of free cash flow spent reaches 45.11%. After this point, the positive effect disappears and a negative effect of stock repurchases on market reactions appears.