Abstract

http://ssrn.com/abstract=891761
 
 

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The Credibility of Open Market Share Repurchase Signaling


Ilona Babenko


Arizona State University

Yuri Tserlukevich


Arizona State University (ASU)

Alexander Vedrashko


Simon Fraser University - Beedie School of Business

October 1, 2012

2012, Journal of Financial and Quantitative Analysis, 47 (5), 1059-1088.

Abstract:     
Open market share repurchase announcements are commonly associated with equity undervaluation, but their signal about firm value can often be misleading. We conjecture that executives who buy shares of their firm before an announcement add credibility to the undervaluation signal. Consistent with this hypothesis, we find that announcement returns are positively related to past insider purchases, especially for firms that are priced less efficiently. Firms whose insiders bought more shares are also more likely to complete their repurchase plans. Finally, we find that insider purchases predict post-announcement stock returns.

Number of Pages in PDF File: 63

Keywords: Payout Policy, Open Market Share Repurchases, Insider Trading, Managerial Stock Ownership, Signaling

JEL Classification: G35, G32, G30

Accepted Paper Series


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Date posted: March 27, 2006 ; Last revised: May 3, 2013

Suggested Citation

Babenko, Ilona and Tserlukevich, Yuri and Vedrashko, Alexander, The Credibility of Open Market Share Repurchase Signaling (October 1, 2012). 2012, Journal of Financial and Quantitative Analysis, 47 (5), 1059-1088.. Available at SSRN: http://ssrn.com/abstract=891761

Contact Information

Ilona Babenko
Arizona State University ( email )
Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States
Yuri Tserlukevich
Arizona State University (ASU) ( email )
Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States
Alexander Vedrashko (Contact Author)
Simon Fraser University - Beedie School of Business ( email )
Beedie School of Business
8888 University Dr.
Burnaby, British Columbia V5A 1S6 V5A1S6
Canada
778-782-3471 (Phone)
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