Journal of Financial and Quantitative Analysis Vol. 47 No. 5 2012
The Credibility of Open Market Share Repurchase Signaling
open access
Abstract
Open market share repurchase announcements are commonly associated with equity undervaluation, but their signal about firm value can often be misleading. We conjecture that executives who buy shares of their firm before an announcement add credibility to the undervaluation signal. Consistent with this hypothesis, we find that announcement returns are positively related to past insider purchases, especially for firms that are priced less efficiently. Firms whose insiders bought more shares are also more likely to complete their repurchase plans. Finally, we find that insider purchases predict post-announcement stock returns.
- DOI
- 10.1017/s0022109012000312
- Volume
- 47
- Issue
- 5
- Pages
- 1059-1088
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex