Network Centrality and Managerial Market Timing Ability: Evidence from Open-Market Repurchase Announcements

76 Pages Posted: 1 Jul 2016 Last revised: 31 Jul 2018

See all articles by Theodoros Evgeniou

Theodoros Evgeniou

INSEAD

Joel Peress

INSEAD - Finance

Theo Vermaelen

INSEAD - Finance; European Corporate Governance Institute (ECGI)

Ling Yue

INSEAD

Date Written: July 31, 2018

Abstract

We document a U-shaped relation between long-run excess returns after buyback authorization announcements and firm centrality in the input-output trade flow network. We rationalize this finding in a model in which investors are endowed with a large but finite capacity for analyzing firms. Investors, therefore, have a better (resp. worse) understanding of peripheral (central) firms - whose cash flows depend on few (many) economic links - than the management, i.e. the insiders. Hence, additional links weaken insiders' informational advantage in peripheral firms but amplify that advantage in central firms. These results provide direct support for the market timing hypothesis of buybacks.

Keywords: Share Repurchases, Buybacks, Market Anomalies, Networks, Supply Chain, Limited Attention, Firm Complexity

Suggested Citation

Evgeniou, Theodoros and Peress, Joel and Vermaelen, Theo and Yue, Ling, Network Centrality and Managerial Market Timing Ability: Evidence from Open-Market Repurchase Announcements (July 31, 2018). INSEAD Working Paper No. 2018/29/DSC/FIN, Available at SSRN: https://ssrn.com/abstract=2801993 or http://dx.doi.org/10.2139/ssrn.2801993

Theodoros Evgeniou (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Joel Peress

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 60 72 40 00 (Phone)
+33 1 60 72 40 45 (Fax)

Theo Vermaelen

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
33 1 60 72 42 63 (Phone)
33 1 60 72 40 45 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Ling Yue

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

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