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Author: Thanh Thiet Nguyen Publisher: ISBN: Category : Languages : en Pages :
Book Description
We reexamine the stock price drifts following open-market stock repurchase announcements by differentiating actual repurchases from repurchase announcements and by controlling for the repurchasing firms' earnings improvement in the announcement year relative to the prior year. Our results show that only firms that actually repurchase their shares exhibit a positive post-announcement drift. More importantly, we find that these repurchasing firms have the same post-announcement drift as their matching firms that have similar size and earnings performance but do not repurchase. Further analysis indicates that the post-repurchase announcement drift is not a distinct anomaly but the well-documented post-earnings announcement drift in disguise. In addition, previous studies suggest that the market perceives IPOs as bad news (i.e., competitive threats) to existing firms in the same industry. At the same time, the market has a tendency to be overly optimistic about IPO prospects, especially during hot IPO markets. Thus, the negative industry rival reaction could be the result of investors' over-optimism toward the IPOs' growth prospects and underestimation of the competitive positions of industry rivals. Our findings show that rival firms use repurchases as a means to signal their firm quality, as well as to correct the market's overreaction to the bad news. These IPO-induced repurchases are stronger when the rival firms are in a concentrated industry and experienced poor stock performance in the previous year.
Author: Thanh Thiet Nguyen Publisher: ISBN: Category : Languages : en Pages :
Book Description
We reexamine the stock price drifts following open-market stock repurchase announcements by differentiating actual repurchases from repurchase announcements and by controlling for the repurchasing firms' earnings improvement in the announcement year relative to the prior year. Our results show that only firms that actually repurchase their shares exhibit a positive post-announcement drift. More importantly, we find that these repurchasing firms have the same post-announcement drift as their matching firms that have similar size and earnings performance but do not repurchase. Further analysis indicates that the post-repurchase announcement drift is not a distinct anomaly but the well-documented post-earnings announcement drift in disguise. In addition, previous studies suggest that the market perceives IPOs as bad news (i.e., competitive threats) to existing firms in the same industry. At the same time, the market has a tendency to be overly optimistic about IPO prospects, especially during hot IPO markets. Thus, the negative industry rival reaction could be the result of investors' over-optimism toward the IPOs' growth prospects and underestimation of the competitive positions of industry rivals. Our findings show that rival firms use repurchases as a means to signal their firm quality, as well as to correct the market's overreaction to the bad news. These IPO-induced repurchases are stronger when the rival firms are in a concentrated industry and experienced poor stock performance in the previous year.
Author: Shrikant Prabhakar Jategaonkar Publisher: ISBN: Category : Languages : en Pages : 222
Book Description
ABSTRACTThe objective of my two essays together is to examine whether the trades made by the insiders prior to open market repurchase (OMR) announcements contain information that can be used to identify the repurchases that are motivated by undervaluation. The existing literature on shares repurchases suggests that while undervaluation has been a dominant motive behind repurchases for past few decades, identifying these undervalued firms still remains a challenge. The book-to-market ratio is commonly used as a proxy for mispricing; however, its ability to identify undervalued repurchasing firms has recently come into doubt (Chan et al., 2004). Instead, I propose using proxies based on insider trading to identify the undervalued repurchasing firms. In the first essay, I document a relation between insider trading and both the short- and long-run stock returns of open market repurchasing firms. My findings suggest that the personal trades made by insiders prior to the OMR announcements contain information that can be used to identify undervalued repurchasing firms. I use various measures of insider trading and show that firms with high (low) insider buying (selling) prior to repurchase announcements earn abnormal stock returns in both the short- and long-run. I also find a positive (negative) relation between insider buying (selling) and the actual repurchasing activity of the firms. In my second essay, I further test whether the trades made by insiders prior to OMR announcements contain information that can be used to identify the repurchases that are motivated by undervaluation by examining the post-announcement operating performance. I find a relation between insider trading and the post-announcement operating performance for the OMR firms that is consistent with the hypothesis that insiders' trades prior to OMR announcements are informative. Specifically, I find that firms with high insider buying prior to the OMR announcements outperform their corresponding control firms, whereas, firms with low insider buying do not. In addition, I test for a relation between insider trading and (a) the accruals management around OMR announcements, and (b) the market reaction to the earnings announcements made by the OMR firms. I find a weak evidence of insiders timing their trades along with accruals management. However, the market reaction to earnings announcements made by the OMR firms does not seem to vary with level of insider trading. Overall, the evidence is consistent with insiders of repurchasing firms knowing when their stocks are undervalued and they timing both their personal and firm level trades accordingly.
Author: Hongsong Neuhauser Publisher: ISBN: Category : Languages : en Pages : 69
Book Description
In the U.S., stock repurchases, as a major cash distribution mechanism of public companies, have exhibited a rising trend that is insensitive to both the increase and decline of the stock market. In this dissertation, we study firms' actual repurchase activities for the period of 1983 to 2008 using both annual and quarterly financial information, combined with insiders fillings with SEC. Our findings suggest a much profound reason to better elucidate firms' actual stock repurchase activities. We find that executive options (but not employee) play a large and significant role in explaining the firm's actual repurchases. More important, we find a positive and significant relationship between timing of executives' option exercises and their firms' level of actual repurchases during the same period. Our results are robust and not driven by methodologies used in measuring stock repurchases, option grants, and option exercise factors, in variable definitions or classifications of firms, nor by sample time periods. Last but not least, we find that actual share repurchase activity (as opposed to repurchase announcements) is not consistent with other hypotheses for stock repurchases, including: (a) flexible substitution for dividends; (b) correction of undervaluation; and (c) disgorging of free cash flow. This evidence has important implications for the ongoing debate regarding the fairness of executive compensation. Finally, our evidence demonstrates the justification of further regulation on actual stock repurchases for the improving of the transparency and the efficiency of security markets.
Author: Huoxin Wang Publisher: Open Dissertation Press ISBN: 9781361385371 Category : Languages : en Pages :
Book Description
This dissertation, "Two Essays on Share Repurchases, Diversification Discount and Analyst Cash Flow Forecasts" by Huoxin, Wang, 王火欣, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This thesis consists of two essays. The first essay examines the effect of share repurchase on the diversification discount of multi-segment firms. The second essay investigates how firms' decisions of share repurchases are influenced by analysts' cash flow forecasts (CFF). In the first essay, I investigate the relation between the market reaction to share repurchase announcements and multi-segment firms' diversification discount. Prior studies have shown that information asymmetry causes a large diversification discount (measured as the negative value of firm excess value). Meanwhile, previous literature suggests that share repurchase announcement is a credible and efficient way in mitigating information asymmetry, with market reaction to share repurchase announcements being more positive for those firms subject to severe information asymmetry. These evidence leads to my conjecture that share repurchase can effectively decrease the diversification discount of multi-segment firms. This conjecture is supported by my empirical results. In addition, the cross-sectional analyses show that the positive correlation is less pronounced for firms with lower credibility of share repurchase announcements. In the additional analysis using a matched sample, I find that diversification discount decreases significantly for firms with share repurchase announcements in post-announcement periods while there is no decrease for the match sample of non-repurchase firms. Further analyses show that my conclusions are mainly driven by diversification discounts (i.e., negative firm excess value) instead of diversification premium (i.e., positive excess firm value) and that as a response to higher diversification discount, firms are less likely to announce share repurchases and more likely to refocus their business lines. The second essay examines how analysts' cash flow forecasts (CFF) affect firms' decisions of open market share repurchases. I find that the likelihood of share repurchases decreases in the presence of CFF. This negative relation is more pronounced for firms with worse information environment, weaker corporate governance, and more severe financial constraint. In addition, within the sample firms with CFF, the negative correlation exists between the likelihood of stock repurchases and the prevalence of CFF, measured by the ratio of the number of analysts issuing CFF among the number of analysts following the same firm and the ratio of CFF frequency relative to the frequency of earnings forecasts. Moreover, using a matched sample, I document a lower likelihood of stock repurchases after the initiation of CFF. Furthermore, I predict and find that the stock repurchase announcements are more credible for firms covered by CFF, as evidenced by higher actual stock repurchase ratio and better firm performance in the following periods. Lastly, I show that the substitutive effect of CFF on stock repurchase announcement is more pronounced when CFF are optimistic. DOI: 10.5353/th_b5312321 Subjects: Stock repurchasing
Author: Noel Pavel N. Jeutang Publisher: ISBN: 9781303864315 Category : Languages : en Pages : 101
Book Description
The first essay examines how the outcome of prior repurchasing activity influences future repurchasing decisions. We find strong evidence that future decisions to repurchase equity are negatively influenced by poorly timed past repurchases. Specifically, we show that the past losses on stock repurchases reduce the propensity to engage in additional repurchases in the future. We find almost no evidence that past gains on repurchases positively or negatively influence future repurchasing activity. These results are robust to various firm characteristics, estimation and sampling methods. Further analyses show that losses on past repurchases influence dividend policy. We show that the dividend-repurchase substitution rate slows down for firms that experience losses in their past repurchase activities. Overall, results suggest that managerial behavioral biases have a strong influence on future repurchase decisions consistent with the loss-aversion concept of prospect theory.
Author: Publisher: ISBN: Category : Languages : en Pages : 222
Book Description
ABSTRACTThe objective of my two essays together is to examine whether the trades made by the insiders prior to open market repurchase (OMR) announcements contain information that can be used to identify the repurchases that are motivated by undervaluation. The existing literature on shares repurchases suggests that while undervaluation has been a dominant motive behind repurchases for past few decades, identifying these undervalued firms still remains a challenge. The book-to-market ratio is commonly used as a proxy for mispricing; however, its ability to identify undervalued repurchasing firms has recently come into doubt (Chan et al., 2004). Instead, I propose using proxies based on insider trading to identify the undervalued repurchasing firms. In the first essay, I document a relation between insider trading and both the short- and long-run stock returns of open market repurchasing firms. My findings suggest that the personal trades made by insiders prior to the OMR announcements contain information that can be used to identify undervalued repurchasing firms. I use various measures of insider trading and show that firms with high (low) insider buying (selling) prior to repurchase announcements earn abnormal stock returns in both the short- and long-run. I also find a positive (negative) relation between insider buying (selling) and the actual repurchasing activity of the firms. In my second essay, I further test whether the trades made by insiders prior to OMR announcements contain information that can be used to identify the repurchases that are motivated by undervaluation by examining the post-announcement operating performance. I find a relation between insider trading and the post-announcement operating performance for the OMR firms that is consistent with the hypothesis that insiders' trades prior to OMR announcements are informative. Specifically, I find that firms with high insider buying prior to the OMR announcements outperform their corresponding control firms, whereas, firms with low insider buying do not. In addition, I test for a relation between insider trading and (a) the accruals management around OMR announcements, and (b) the market reaction to the earnings announcements made by the OMR firms. I find a weak evidence of insiders timing their trades along with accruals management. However, the market reaction to earnings announcements made by the OMR firms does not seem to vary with level of insider trading. Overall, the evidence is consistent with insiders of repurchasing firms knowing when their stocks are undervalued and they timing both their personal and firm level trades accordingly.
Author: Harry DeAngelo Publisher: Now Publishers Inc ISBN: 1601982046 Category : Corporations Languages : en Pages : 215
Book Description
Corporate Payout Policy synthesizes the academic research on payout policy and explains "how much, when, and how". That is (i) the overall value of payouts over the life of the enterprise, (ii) the time profile of a firm's payouts across periods, and (iii) the form of those payouts. The authors conclude that today's theory does a good job of explaining the general features of corporate payout policies, but some important gaps remain. So while our emphasis is to clarify "what we know" about payout policy, the authors also identify a number of interesting unresolved questions for future research. Corporate Payout Policy discusses potential influences on corporate payout policy including managerial use of payouts to signal future earnings to outside investors, individuals' behavioral biases that lead to sentiment-based demands for distributions, the desire of large block stockholders to maintain corporate control, and personal tax incentives to defer payouts. The authors highlight four important "carry-away" points: the literature's focus on whether repurchases will (or should) drive out dividends is misplaced because it implicitly assumes that a single payout vehicle is optimal; extant empirical evidence is strongly incompatible with the notion that the primary purpose of dividends is to signal managers' views of future earnings to outside investors; over-confidence on the part of managers is potentially a first-order determinant of payout policy because it induces them to over-retain resources to invest in dubious projects and so behavioral biases may, in fact, turn out to be more important than agency costs in explaining why investors pressure firms to accelerate payouts; the influence of controlling stockholders on payout policy --- particularly in non-U.S. firms, where controlling stockholders are common --- is a promising area for future research. Corporate Payout Policy is required reading for both researchers and practitioners interested in understanding this central topic in corporate finance and governance.
Author: G. Constantinides Publisher: Elsevier ISBN: 9780444513632 Category : Business & Economics Languages : en Pages : 698
Book Description
Arbitrage, State Prices and Portfolio Theory / Philip h. Dybvig and Stephen a. Ross / - Intertemporal Asset Pricing Theory / Darrell Duffle / - Tests of Multifactor Pricing Models, Volatility Bounds and Portfolio Performance / Wayne E. Ferson / - Consumption-Based Asset Pricing / John y Campbell / - The Equity Premium in Retrospect / Rainish Mehra and Edward c. Prescott / - Anomalies and Market Efficiency / William Schwert / - Are Financial Assets Priced Locally or Globally? / G. Andrew Karolyi and Rene M. Stuli / - Microstructure and Asset Pricing / David Easley and Maureen O'hara / - A Survey of Behavioral Finance / Nicholas Barberis and Richard Thaler / - Derivatives / Robert E. Whaley / - Fixed-Income Pricing / Qiang Dai and Kenneth J. Singleton.
Author: Thanh Thiet Nguyen
Author: Thanh Thiet Nguyen
Author: Shrikant Prabhakar Jategaonkar
Author: Hongsong Neuhauser
Author: Huoxin Wang
Author: Noel Pavel N. Jeutang
Author: 
Author: Gustavo Grullon
Author: Harry DeAngelo
Author: Feifei Li
Author: G. Constantinides