Do open-market stock repurchases convey firm-specific or industry-wide information? Evidence from REITs

Gow-Cheng Huang (), Kartono Liano () and Ming-Shiun Pan ()
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Gow-Cheng Huang: Tuskegee University
Kartono Liano: Mississippi State University
Ming-Shiun Pan: Shippensburg University

Journal of Economics and Finance, 2019, vol. 43, issue 2, No 10, 382-397

Abstract: Abstract This study examines the extent of firm-specific and industry-level information conveyed in open-market stock repurchases announced by REITs. We measure information revealed in open-market stock repurchase announcements using stock return and decompose the stock return into firm-specific, industry-wide, and market components. We find that the announcement period return is mainly attributed to the firm-specific component. However, long-term returns following the announcement are largely due to the industry return components. We also find that changes in profitability are not related to the announcement abnormal return. Our results suggest that the repurchase signal is about the intrinsic value of a REIT rather than the REIT’s future prospect. Moreover, the repurchase signal is fully incorporated into the pricing process at the announcement.

Keywords: Open-market stock repurchases; REITs; Firm-specific information; Industry-wide information (search for similar items in EconPapers)
JEL-codes: G14 G35 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s12197-018-9463-9

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