Overconfidence and the Timing of Share Repurchases

36 Pages Posted: 24 Jun 2015

Date Written: June 23, 2015

Abstract

We investigate the efficiency of open market repurchases across managerial confidence types. We find that moderately confident managers repurchase at relatively lower prices than overconfident managers and at prices that are closer to the quarterly low stock price. Additionally, we analyze bid-ask spreads and show that spreads are relatively lower in quarters when overconfident managers are repurchasing shares. Our results suggest that repurchases by moderately confident managers are informed attempts to time the market, while repurchases by overconfident managers are either ill-informed or made for other reasons.

Keywords: Behavioral Finance, Corporate Finance, Buybacks, Repurchases, Overconfidence, Timing

Suggested Citation

Handy, Jonathan F. and Underwood, Shane, Overconfidence and the Timing of Share Repurchases (June 23, 2015). Available at SSRN: https://ssrn.com/abstract=2622097 or http://dx.doi.org/10.2139/ssrn.2622097

Jonathan F. Handy (Contact Author)

Furman University ( email )

3300 Poinsett Hwy
Greenville, SC South Carolina 29607
United States
8642943139 (Phone)

Shane Underwood

Baylor University ( email )

P.O. Box 98004
Waco, TX 76798-8004
United States
254-710-4524 (Phone)

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