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Effect of Stock Price Information on Timing of Share Repurchases

Chong-Meng ()
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Chong-Meng: Faculty of Economics and Management, Universiti Putra Malaysia, 43400 Serdang, Malaysia Author-2-Name: Chee Author-2-Workplace-Name: School of Social Science, Heriot-Watt University, 62200 Putrajaya, Malaysia Author-3-Name: Nazrul Hisyam Bin Ab Razak Author-3-Workplace-Name: Faculty of Economics and Management, Universiti Putra Malaysia, 43400 Serdang, Malaysia Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:

GATR Journals from Global Academy of Training and Research (GATR) Enterprise

Abstract: Objective – This study investigates whether private information newly incorporated into stock price enhances performance in timing share repurchases. Methodology/Technique – Cost saving gained in share repurchases is used a proxy for performance of market-timing in share repurchases and firm-specific stock return variation is used to gauge stock price informativeness. A sample of 334 U.S. repurchasing firms are tested using panel data regression. Findings – The paper concludes that managers possess better market timing skill by obtaining more cost saving from their share repurchases when private information is reflected in stock price. Stock price informativeness may be the tool for managers to improve their market timing skill to take advantage of the stock market. Furthermore, firms with smaller size and a higher market-to-book ratios, and firms with higher cash-to-assets ratios are found to achieve more cost saving in buying back their shares indicating that these firms are able to time the market in share repurchasing. Novelty – Despite numerous previous studies focusing solely on using share repurchases announcement for computing cumulative abnormal returns in testing managerial market timing, this study contributes to the literature in several ways: (i) providing evidence relating stock price informativeness and performance of market-timing in share repurchases; (ii) developing a better timing measure constructed using actual repurchasing data; (iii) adopting a cost saving measure as the timing measure instead of cumulative abnormal return. Type of Paper: Empirical.

Keywords: Managerial Learning Hypothesis; Market Timing; Stock Repurchase; Stock Price Informativeness; Firmspecific Stock Return Variation. (search for similar items in EconPapers)
JEL-codes: G12 G13 G14 (search for similar items in EconPapers)
Pages: 11
Date: 2019-03-19
New Economics Papers: this item is included in nep-fmk and nep-sea
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Published in Journal of Finance and Banking Review, Volume 4, Issue 1

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