Institutional investment horizons and open-market stock repurchases: evidence from the Taiwan stock market

Lee-Young Cheng and Yu-En Lin

Applied Financial Economics, 2012, vol. 22, issue 8, 611-623

Abstract: This article investigates how the investment horizon of a firm's institutional shareholders affects the outcome of stock repurchase. Our results show that repurchasing firms with long-term institutional investors experience significantly positive abnormal returns around the repurchasing announcements, actually buy back more shares during the execution period, and perform better over a subsequent 3-year period than repurchasing firms with short-term institutional investors. These findings suggest that repurchasing firms held by long-term institutional investors can acquire certification- and monitoring-related benefits, thus providing more credible signals about the true value of firms.

Date: 2012
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DOI: 10.1080/09603107.2011.621878

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