If It’s Good for the Firm, It’s Good for Me: Insider Trading and Repurchases Motivated by Undervaluation

Jategaonkar, Shrikant P.

doi:10.2139/ssrn.1598434

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If It’s Good for the Firm, It’s Good for Me: Insider Trading and Repurchases Motivated by Undervaluation

Forthcoming, The Financial Review

36 Pages Posted: 2 May 2010 Last revised: 8 Jul 2013

See all articles by Shrikant P. Jategaonkar

Shrikant P. Jategaonkar

SIUE

Date Written: September 29, 2011

Abstract

My findings suggest that information inherent in insider trading can be used to identify undervalued repurchasing firms. I examine the relation between insider trading and the performance of open market repurchase (OMR) firms. I show that firms with high net insider buying prior to open market repurchase announcements not only earn abnormal stock returns in both the short- and long-run, but also exhibit better operating performance. Overall, the evidence is consistent with insiders timing their trades prior to open market repurchase announcements.

Keywords: Share repurchase, Insider trading, Long-run stock performance

JEL Classification: G30, G32

Suggested Citation: Suggested Citation

Jategaonkar, Shrikant P., If It’s Good for the Firm, It’s Good for Me: Insider Trading and Repurchases Motivated by Undervaluation (September 29, 2011). Forthcoming, The Financial Review, Available at SSRN: https://ssrn.com/abstract=1598434 or http://dx.doi.org/10.2139/ssrn.1598434