The effects of ownership and stock liquidity on the timing of repurchase transactions

Abstract

We analyze detailed monthly data on U.S. open market stock repurchases (OMRs) that recently became available following stricter disclosure requirements. We find evidence that OMRs are timed to benefit non-selling shareholders. We present evidence that the profits to companies from timing repurchases are significantly related to ownership structure. Institutional ownership reduces companies' opportunities to repurchase stock at bargain prices. At low levels, insider ownership increases timing profits and at high levels it reduces them. Stock liquidity increases profits from timing OMRs.

Stock Market Liquidity: Financially Constrained Firms and Share Repurchase

“…Repurchases have recently become the payout decision of choice, in part, because of rising stock market liquidity. De Cesari, Espenlaub, Khurshed and Simkovic (2012) analyze the impact of liquidity and ownership structure on the repurchase decision. They find a positive relation between buyback profits and firm liquidity.…”

The Overnight Return Temporal Market Anomaly

“…), Cesari, Espenlaub, Khurshed, and Simkovic (2012) argue and disagree on the effects of share-holding and stock liquidation on the timing transactions for open and close positions ("buy" in case of a short position; and "sell" in case of a long position), but in their paper no more details for short-term or daily and intraday TTF functionalities were given; and Demiralp, D'Mello, Schlingemann, and Subramaniam (2011), in their paper, state that old-issue share returns and passive trading, are both strongly connected with the coexisting of old-issue changes in corporate holding for a time period as long as up to 3 years after the TTF time. Obviously, this period is regarded as too big, even for the "buy-and-hold" investors, for nowadays swing and volatile securities markets traded on a daily and intraday bases; e.g.…”

Managerial Timing Ability and Share Repurchases

“…기존연구에서 유상증자 또는 IPO와 같은 자본조달 이후에 음(-)의 주가성과를 보여 마켓타이밍 가설을 지지하고 있다 (Loughran and Ritter, 1995;Baker and Wugler, 2002;Jenter et al, 2011;Larrain and UrzúaI, 2013;황보우, 김문겸, 2014;길재욱 외 2인, 2016). 또한 기업은 주가가 하락한 상황에서 자사주 취득을 결정하며, 취득 공시일 이후에 장기적으로 양(+)의 주가성과를 보여 해당 가설을 지지하고 있는 상황이다 (Mitchell and Stafford, 2000;Ikenberry et al, 2000;Peyer and Vermaelen, 2009 (Stephens and Weisbach, 1998;Cesari et al, 2012;Ben et al, 2014;Dittmar and Field, 2015). 또한, 자사주 취득은 기업가치의 저평가와 관련성이 낮을 수 있으며 실제의 자사주 취득 완료일 이후 장기성과가 증가하지 않는 점을 고려해 볼 때, 공시일을 기준으로 한 기존연구의 실증결과만으로 마켓타이밍 가설이 확고하게 지지된다고 보기에는 여전히 한계가 있다 (Kahle, 2002;Fried, 2001;Zhang, 2005;Massa et al, 2007;정성창, 이용교, 2003;변진호, 2004;김영환, 정성창, 2008 (Cook et al, 2004;Cesari et al, 2012;Ben et al, 2014;Dittmar and Field, 2015).…”

“…반면, 스웨덴시장의 경우에는 평균적인 시장가격보다 기업의 자사주 매입단가가 높게 나타나 경영자의 마켓타이밍을 주장하기에는 여전히 한계가 있다는 상이한 결과를 보이고 있다 (Ridder, 2015). 또한, Ginglinger and Hamon(2007) (Cesari et al, 2012).…”

“…우선 정보효과에 의하면 정보거래자가 소수인 경우 사적정보가 주가에 서서히 반영될 수 있지만 (Kyle, 1985), 정보거래자가 다수이면 수익극대화를 달성하기 위한 상호 간의 경쟁이 치열해지므로 기업의 사적정보가 신속하게 주가에 반영될 수 있다 (Cesari et al, 2012…”