Signaling Power of Open Market Share Repurchases in Germany Andreas Hackethal* Johann Wolfgang Goethe-Universität, Frankfurt am Main Alexandre Zdantchouk Freitag Gellert & Co., Frankfurt am Main This version: February 2005 Abstract This paper shows that abnormal stock price returns around open market repurchase announcements are about four times higher in Germany than in the US (12% versus 3%). We hypothesize that this observation can be explained by country differences in repurchase regulation. Our empirical evidence indicates that German managers primarily buy back shares to signal an undervaluation of their firm. We demonstrate that the stringent repurchase process prescribed by German law attributes a higher credibility to such a signal than lax US regulations and thereby corroborate our hypothesis. * Corresponding author: Andreas Hackethal, Mertonstr. 17, 60325 Frankfurt am Main, Germany. E-mail: Hackethal@em.uni-frankfurt.de. Financial support from the E-Finance Lab, Frankfurt am Main, and from Freitag Gellert & Co., Frankfurt am Main, is gratefully acknowledged.