Institutional Investors, Stock Repurchases and Information Asymmetry

Abstract

This paper seeks to determine if institutional investors influence stock repurchases. Specifically, this study tests whether institutional investors encourage stock repurchases in firms with high information asymmetry. Firm and year fixed effect regressions examining the effect of changes in institutional investor levels to subsequent changes in stock repurchase levels are used. For robustness, regressions are run using difference-GMM regressions and regressions for different time periods on the same relationship. I find that increased institutional ownership leads to increased stock repurchases and this relationship is stronger in firms with higher information asymmetry. Results indicate that institutional investors encourage management to increase repurchases so as to exploit their informational advantage over less informed investors about the true value of the firm. Institutions are the dominant force in U.S. stock ownership. The results in this paper indicate that institutional investors are using their informational advantage in firms that are difficult to value in an attempt to boost their return at the expense of other less informed shareholders.

Faktor-Faktor yang Mempengaruhi Share Repurchase Decisions Pada Perusahaan yang Terdaftar di Bursa Efek Indonesia

“…Penelitian mengenai pengaruh pendapatan terhadap share repurchase menghasilkan kesimpulan adanya pengaruh negatif (Bens, Nagar, Skinner, & Wong, 2003;Skinner, 2006;Benhamouda & Watson, 2010;Scott, 2014). Ketika pendapatan yang dihasilkan perusahaan mengalami penurunan dan akan berdampak terhadap earning per share, salah satu cara yang dapat dilakukan perusahaan untuk mengimbanginya ialah dengan melakukan pembelian kembali saham.…”

“…Hasil ini menunjukkan penurunan pada pendapatan perusahaan menyebabkan peningkatan pada pembelian kembali saham. Hasil ini mengkorfimasi penelitian sebelumnya (Benhamouda & Watson, 2010;Scott, 2014). Jika pendapatan yang dihasilkan perusahaan mengalami penurunan, hal tersebut akan berdampak terhadap penurunan earning per share perusahaan.…”

İktisadi ve İdari Bilimlerde Akademik Analiz ve Yorumlar

“…or cash returns (Karwowski, 2016). Accounting information that has always been the most fundamental information examined in a debt contract, is used by creditors for valuation and decision making, which is relevant for efficient debt-contracting (Scott, 2014).…”