Market Timing in Open Market Bond Repurchases

Nadav Steinberg and Avi Wohl
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Avi Wohl: Tel-Aviv University

No 2022.15, Bank of Israel Working Papers from Bank of Israel

Abstract: Bond repurchases are widespread in the US and other markets but data limitations have thus far prevented market-timing analysis. We fill this gap using unique daily data from Israel and show that firms time the market in their actual open-market bond repurchases. Firms repurchase their bonds following a decline in bond prices. The disclosure of bond repurchases results in significantly positive abnormal returns on the repurchased bonds and is followed by a positive drift in subsequent 5 trading days. The market reaction to actual bond repurchases is timelier when conducted within a preannounced repurchase program, and the impact is stronger when the firm repurchases high-yield bonds. Insiders’ net purchases increase prior to bond repurchases, and the abnormal return following a bond repurchase tends to be higher when it is preceded by positive net insider purchases. The results lend support to the information motive for bond repurchases.

Keywords: Fixed income securities; Capital structure; Financial policy; Payout policy; Event studies; Information and disclosure (search for similar items in EconPapers)
Pages: 43 pages
Date: 2022-08
New Economics Papers: this item is included in nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:boi:wpaper:2022.15

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