Does reputation matter? Evidence from share repurchases
Hironori Kawase and
Journal of Corporate Finance, 2019, vol. 58, issue C, 287-306
This paper examines whether the stock market considers the firm's reputation established through a history of management earnings forecasting when it evaluates open market repurchase announcements. We refer to this established reputation as the firm's “forecast reputation”. We find that while the stock market considers the firm's “repurchase reputation” (proxied by prior repurchase completion rates), it also considers the firm's forecast reputation established from the accuracy of prior management earnings forecasting, suggesting a spillover effect of forecast reputation. Further, interaction test between the two reputation variables reveals that the market reacts more to the firm's forecast reputation when its repurchase reputation is low. Additional analyses suggest that when a firm announces a share repurchase program for the first time (i.e., when there is no repurchase reputation), investors turn to the forecast reputation within the firm as an alternative source of reputation, on which the credibility of repurchase announcements is assessed. Overall, our study provides evidence that firms establish a reputation in the market through multiple sources of announcements.
Keywords: Reputation; Share repurchases; Spillover effect (search for similar items in EconPapers)
JEL-codes: G14 G35 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:58:y:2019:i:c:p:287-306
Access Statistics for this article
Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter
More articles in Journal of Corporate Finance from Elsevier
Bibliographic data for series maintained by Haili He ().