Information Asymmetry and the Market Response to Open Market Share Repurchases

Bong Soo Lee and Nathan Mauck

MPRA Paper from University Library of Munich, Germany

Abstract: This paper proposes a new measure of firm information asymmetry. The information asymmetry measure is based on causality tests relating repurchase information to firm returns. Our results indicate that firms with greater information asymmetry show larger abnormal returns surrounding the announcement of an open market share repurchase. This new information asymmetry proxy remains a significant explanatory factor for announcement abnormal returns after controlling for other conventional information asymmetry proxies, such as firm size, number of analysts following, and analyst forecast dispersion. Further, our measure of information asymmetry is positively related to long-term abnormal returns at one, two, and three-year windows.

Keywords: Payout policy; Open market share repurchases; Information asymmetry; Time series; Causality (search for similar items in EconPapers)
JEL-codes: G30 G35 (search for similar items in EconPapers)
Date: 2014-03-01
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:54066

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