Journal of Banking & Finance Vol. 58 2015
Takeover vulnerability and the credibility of signaling: The case of open-market share repurchases
Abstract
There is debate in the literature focuses on whether open market repurchases can be taken as a signal of stock undervaluation. This research argues that takeover pressures before a repurchase announcement can be a credible signal of undervaluation. The empirical results indicate that repurchasing firms with a higher probability of takeover experience greater announcement effects, improvements in operating performance and long-run abnormal return, positive forecast revisions by financial analysts, and enhanced agreement between management and shareholders. These findings suggest that takeover probability and open-market share repurchases appear to constitute a double-signal for conveying stock undervaluation to the market.
- DOI
- 10.1016/j.jbankfin.2015.04.022
- Volume
- 58
- Pages
- 405-417
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib