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Buyback behavior of initial public offering firms

Sheng-Syan Chen, Kim Wai Ho, Chia-Wei Huang and Yanzhi Wang

Journal of Banking & Finance, 2013, vol. 37, issue 1, 32-42

Abstract: We examine the motives behind the share repurchase decisions of initial public offering (IPO) firms by studying the stock and operating performance after the IPO date. We find that IPO firms that announce repurchases within 3years of IPO dates exhibit poorer long-run abnormal operating performance than other IPO firms. These IPO firms also experience poorer stock return performance and downward analyst forecast revisions. Moreover, these firms show intensive insider selling transactions after the IPO date. These results for IPO announcing repurchase firms are consistent with the misleading hypothesis, which suggests that these IPO firms mislead investors by announcing repurchases as false signals.

Keywords: Initial public offering; Repurchase; Buyback (search for similar items in EconPapers)
JEL-codes: G30 G35 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:eee:jbfina:v:37:y:2013:i:1:p:32-42