Open Market Repurchase Programs - Evidence from Finland

Högholm, Kenneth; Högholm, Victor

doi:10.5539/ijef.v9n12p13

Cited by 3 publications

(1 citation statement)

References 11 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The initial repurchase announcement was likely to significantly reduce any information asymmetries, signal higher information content and higher market reaction than subsequent repurchase announcements (Andriosopoulos & Lasfer, 2015). In a similar vein, abnormal returns were found to be larger when the repurchase programme was initiated by firms for the first or the second time, thus, indicating that the information content in these announcements is perceived to be more valuable than that in a regular use of repurchase programmes (Högholm & Högholm, 2017). Some research findings suggest that stock market may not fully discover all information that managers intend to convey via share repurchase; the market will further interpret the information and incorporate the information in stock price in subsequent actual share repurchases (Babenko et al, 2012; Lee & Mauck, 2018; Leng & Noronha, 2013).…”

Section: Theoretical Reviewmentioning

confidence: 92%

Do Share Repurchases Distort Stock Prices? Evidence from the United States and Malaysia

Chee

Razak

Noordin

2021

Studies in Microeconomics

View full text Add to dashboard Cite

Heavy share buyback years after the global finance crisis 2008–2009 drew criticism from scholars and financial press that share repurchases were being used by firms to manipulate their stock prices. This paper examines whether a greater firm’s repurchase intensity distorts stock prices reflecting to information. We analyse 2 sets of unbalanced panel data that contain a sample of 337 US and another sample of 167 Malaysian repurchasing firms between 2012 and 2016. Contrary to the criticism, we find that a greater firms’ share buyback intensity in the USA stimulates faster incorporation of information in price and results in more efficient stock prices. The main findings hold true and are robust when an alternative measure of share repurchase intensity was used. The findings of US sample support the notion that share repurchase serves as a signalling tool and price support to promote more efficient stock prices. We also find no strong evidence supporting the notion that shares repurchased by Malaysian firms distort stock prices. JEL Classification: G10, G14, G35

show abstract

Section: Theoretical Reviewmentioning

confidence: 92%

Do Share Repurchases Distort Stock Prices? Evidence from the United States and Malaysia

Chee

Razak

Noordin

2021

Studies in Microeconomics

View full text Add to dashboard Cite

show abstract

The Big Bang: Stock Market Capitalization in the Long Run

Kuvshinov

Zimmermann

2018

SSRN Journal

View full text Add to dashboard Cite

This paper presents annual stock market capitalization data for 17 advanced economies from 1870 to today. Extending our knowledge beyond individual benchmark years in the seminal work of Rajan and Zingales (2003) reveals a striking new time series pattern: over the long run, the evolution of stock market size resembles a hockey stick. The stock market cap to GDP ratio was stable for more than a century, then tripled in the 1980s and 1990s and remains high to this day. This trend is common across countries and mirrors increases in other financial and price indicators, but happens at a much faster pace. We term this sudden structural shift "the big bang" and use novel data on equity returns, prices and cashflows to explore its underlying drivers. Our first key finding is that the big bang is driven almost entirely by rising equity prices, rather than quantities. Net equity issuance is sizeable but relatively constant over time, and plays very little role in the short, medium and long run swings in stock market cap. Second, much of this price increase cannot be explained by more favourable fundamentals such as profits and taxes. Rather, it is driven by lower equity risk premiaa factor that is linked to subjective beliefs and can be quite fickle, and easily reversible. Third, consistent with this risk premium view of stock market size, the market cap to GDP ratio is a reliable indicator of booms and busts in the equity market. High stock market capitalization-the "Buffet indicator"forecasts low subsequent equity returns, and lowrather than high-cashflow growth, outperforming standard predictors such as the dividend-price ratio.

show abstract

Effect of Stock Price Information on Timing of Share Repurchases

Chee

Razak

2019

J. Fin. Bank. Review

View full text Add to dashboard Cite

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; Firm-specific Stock Return Variation. JEL Classification: G12, G13, G14. DOI: https://doi.org/10.35609/jfbr.2019.4.1(5)

show abstract

Open Market Repurchase Programs - Evidence from Finland

Cited by 3 publications

References 11 publications

Do Share Repurchases Distort Stock Prices? Evidence from the United States and Malaysia

Do Share Repurchases Distort Stock Prices? Evidence from the United States and Malaysia

The Big Bang: Stock Market Capitalization in the Long Run

Effect of Stock Price Information on Timing of Share Repurchases

Contact Info

Product

Resources

About