Directors' Purchases 'Talk' and Share Repurchases 'Whisper'?

65 Pages Posted: 2 Nov 2014 Last revised: 1 Aug 2018

See all articles by Dimitris Andriosopoulos

Dimitris Andriosopoulos

Strathclyde Business School

Hafiz Hoque

University of York; City University London - Sir John Cass Business School

Date Written: July 2, 2018

Abstract

With daily trades of directors’ purchases and share repurchase we find that the former is preceded by larger share price drops and trigger a better short- and long-term market performance. Further, when directors purchase shares with their own wealth they time the market by buying shares at a discount of 1.9% and 6.7% over the two and twelve months, respectively, surrounding these trades. In contrast, directors repurchase shares at a premium of 0.5% which reverts to zero over the two and twelve months, respectively, surrounding these trades, corroborating the price support hypothesis. Even when both trades occur within two days directors still purchase shares at a larger discount of 3% over the twelve months surrounding these trades. Finally, directors’ long-term incentive plans (accumulated shares) increase the likelihood of share repurchasing (directors’ purchasing) but are inversely related to the market valuation of these trades.

Keywords: Share repurchases, directors’ purchases, price support, market timing, directors' wealth, LTIPs, financial constraints

JEL Classification: G1, G14, G3, G35

Suggested Citation

Andriosopoulos, Dimitris and Hoque, Hafiz, Directors' Purchases 'Talk' and Share Repurchases 'Whisper'? (July 2, 2018). Available at SSRN: https://ssrn.com/abstract=2517323 or http://dx.doi.org/10.2139/ssrn.2517323

Dimitris Andriosopoulos (Contact Author)

Strathclyde Business School ( email )

199 Cathedral Street
Department of Accounting and Finance
Glasgow, G4 0QU
United Kingdom
+44(0)1415483892 (Phone)

HOME PAGE: http://www.strath.ac.uk/staff/andriosopoulosdimitrisdr/

Hafiz Hoque

University of York ( email )

The York Management School
York, YO10 5GD
United Kingdom
+44 (0) 7515890949 (Phone)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44(0)7515890949 (Phone)
+44(0)2070408546 (Fax)

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