Idiosyncratic risk and share repurchases

Yuan-Teng Hsu and Chia-Wei Huang

Finance Research Letters, 2016, vol. 18, issue C, 76-82

Abstract: The ‘open market share repurchase anomaly’ occurs when stocks of repurchasing firms subsequently outperform non-repurchasing firms matched on several firm characteristics. We document that the post-repurchase outperformance reflects higher idiosyncratic risk exposure for repurchasing firms than matching firms. A possible explanation is that, as firms’ leverage increases due to share repurchases, their exposure to idiosyncratic risk rises, thus increasing their stocks’ expected returns relative to matched firms.

Keywords: Long-run abnormal return; Share repurchases; Idiosyncratic risk (search for similar items in EconPapers)
JEL-codes: G12 G35 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:18:y:2016:i:c:p:76-82

DOI: 10.1016/j.frl.2016.04.003

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