Market timing in open market bond repurchases

Nadav Steinberg and Avi Wohl

Journal of Banking & Finance, 2024, vol. 161, issue C

Abstract: Bond repurchases are widespread in the US and other markets but data limitations have thus far prevented market-timing analysis. Using unique Israeli daily data we show that firms time the market in their actual open market bond repurchases. Bond repurchases typically follow price decline and result in significantly positive abnormal returns in the following days: about 1 % in five trading days. The market reaction is quicker within a pre-announced repurchase program, and it is stronger when the firm repurchases high-yield bonds or when the repurchase is preceded by positive net insider share purchases. The results lend support to the information motive for bond repurchases benefiting ongoing stakeholders but detrimental to selling bondholders.

Keywords: Bond repurchases; Bond buybacks; Repurchase (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:161:y:2024:i:c:s0378426624000141

DOI: 10.1016/j.jbankfin.2024.107094

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