This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Double Signals or Single Signal? An Investigation of Insider Trading Around Share Repurchases

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Michael Firth (Lingnan University of Hong Kong)
T. Y. Leung (City University of Hong Kong)
Oliver M. Rui (The Chinese University of Hong Kong)

Additional information is available for the following registered author(s):

Abstract

This study examines directors' dealing activity around share repurchasing periods in Hong Kong. There are significant insider trading activities before the share repurchasing period. Consistent with the signaling hypothesis, the directors' purchase activities during the share repurchase period are significantly higher than the expected level while the directors¡¦ sale activities are abnormally lower than the expected level. Double signals of share repurchases and directors¡¦ purchases create a stronger signal in conveying undervaluation. However, insider sales around share repurchase discounts the undervaluation signal. This study provides some evidence that information signaling is a dominating factor driving the share repurchase decision.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.hkimr.org/cms/upload/publication_app/pub_full_0_2_191_HKIMR%20no22_BW.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 222008.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 28 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:hkm:wpaper:222008

Contact details of provider:
Postal: 55th Floor , Two International Finance Centre , 8 Finance Street , Central, Hong Kong
Phone: (852)2878 1978
Fax: (852)2878 7006
Email:
Web page: http://www.hkimr.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (HKIMR).

Related research
Keywords:

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, vol. 14(1), pages 3-31, March. [Downloadable!] (restricted)
  2. Lee, D Scott & Mikkelson, Wayne H & Partch, M Megan, 1992. " Managers' Trading around Stock Repurchases," Journal of Finance, American Finance Association, vol. 47(5), pages 1947-61, December. [Downloadable!] (restricted)
  3. Barclay, Michael J. & Smith, Clifford Jr., 1988. "Corporate payout policy : Cash Dividends versus Open-Market Repurchases," Journal of Financial Economics, Elsevier, vol. 22(1), pages 61-82, October. [Downloadable!] (restricted)
  4. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-65, June. [Downloadable!] (restricted)
  5. Laurie Simon Bagwell, 1991. "Share Repurchase and Takeover Deterrence," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 72-88, Spring. [Downloadable!] (restricted)
  6. Denis, David J, 1990. " Defensive Changes in Corporate Payout Policy: Share Repurchases and Special Dividends," Journal of Finance, American Finance Association, vol. 45(5), pages 1433-56, December. [Downloadable!] (restricted)
  7. Jagannathan, Murali & Stephens, Clifford P. & Weisbach, Michael S., 2000. "Financial flexibility and the choice between dividends and stock repurchases," Journal of Financial Economics, Elsevier, vol. 57(3), pages 355-384, September. [Downloadable!] (restricted)
  8. Dittmar, Amy K, 2000. "Why Do Firms Repurchase Stock?," Journal of Business, University of Chicago Press, vol. 73(3), pages 331-55, July. [Downloadable!] (restricted)
  9. Gustavo Grullon & Roni Michaely, 2002. "Dividends, Share Repurchases, and the Substitution Hypothesis," Journal of Finance, American Finance Association, vol. 57(4), pages 1649-1684, 08. [Downloadable!] (restricted)
  10. Bartov, Eli, 1991. "Open-market stock repurchases as signals for earnings and risk changes," Journal of Accounting and Economics, Elsevier, vol. 14(3), pages 275-294, September. [Downloadable!] (restricted)
  11. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January. [Downloadable!] (restricted)
  12. Rozeff, Michael S & Zaman, Mir A, 1988. "Market Efficiency and Insider Trading: New Evidence," Journal of Business, University of Chicago Press, vol. 61(1), pages 25-44, January. [Downloadable!] (restricted)
  13. Michael Gombola & Hei Wai Lee & Feng-Ying Liu, 1997. "Evidence of Selling by Managers after Seasoned Equity Offering Announcements," Financial Management, Financial Management Association, vol. 26(3), Fall.
  14. Lin, Ji-Chai & Howe, John S, 1990. " Insider Trading in the OTC Market," Journal of Finance, American Finance Association, vol. 45(4), pages 1273-84, September. [Downloadable!] (restricted)
  15. Howe, Keith M & He, Jia & Kao, G Wenchi, 1992. " One-Time Cash Flow Announcements and Free Cash-Flow Theory: Share Repurchases and Special Dividends," Journal of Finance, American Finance Association, vol. 47(5), pages 1963-75, December. [Downloadable!] (restricted)
  16. McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October. [Downloadable!] (restricted)
  17. Dann, Larry Y., 1981. "Common stock repurchases : An analysis of returns to bondholders and stockholders," Journal of Financial Economics, Elsevier, vol. 9(2), pages 113-138, June. [Downloadable!] (restricted)
  18. Wayne H. Mikkelson & Richard S. Ruback, 1991. "Targeted Repurchases and Common Stock Returns," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 544-561, Winter. [Downloadable!] (restricted)
  19. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112. [Downloadable!] (restricted)
  20. Vermaelen, Theo, 1984. "Repurchase Tender Offers, Signaling, and Managerial Incentives," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(02), pages 163-181, June. [Downloadable!]
  21. Meulbroek, Lisa K, 1992. " An Empirical Analysis of Illegal Insider Trading," Journal of Finance, American Finance Association, vol. 47(5), pages 1661-99, December. [Downloadable!] (restricted)
  22. Kole, Stacey R., 1995. "Measuring managerial equity ownership: a comparison of sources of ownership data," Journal of Corporate Finance, Elsevier, vol. 1(3-4), pages 413-435, April. [Downloadable!] (restricted)
  23. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  24. Denis, David J. & Denis, Diane K. & Sarin, Atulya, 1994. "The Information Content of Dividend Changes: Cash Flow Signaling, Overinvestment, and Dividend Clienteles," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(04), pages 567-587, December. [Downloadable!]
  25. Lakonishok, Josef & Vermaelen, Theo, 1990. " Anomalous Price Behavior around Repurchase Tender Offers," Journal of Finance, American Finance Association, vol. 45(2), pages 455-77, June. [Downloadable!] (restricted)
  26. Seyhun, H. Nejat, 1986. "Insiders' profits, costs of trading, and market efficiency," Journal of Financial Economics, Elsevier, vol. 16(2), pages 189-212, June. [Downloadable!] (restricted)
  27. Dann, Larry Y. & Masulis, Ronald W. & Mayers, David, 1991. "Repurchase tender offers and earnings information," Journal of Accounting and Economics, Elsevier, vol. 14(3), pages 217-251, September. [Downloadable!] (restricted)
  28. Barber, Brad M. & Lyon, John D., 1997. "Detecting long-run abnormal stock returns: The empirical power and specification of test statistics," Journal of Financial Economics, Elsevier, vol. 43(3), pages 341-372, March. [Downloadable!] (restricted)
  29. John, Kose & Lang, Larry H P, 1991. " Insider Trading around Dividend Announcements: Theory and Evidence," Journal of Finance, American Finance Association, vol. 46(4), pages 1361-89, September. [Downloadable!] (restricted)
  30. Seyhun, H Nejat & Bradley, Michael, 1997. "Corporate Bankruptcy and Insider Trading," Journal of Business, University of Chicago Press, vol. 70(2), pages 189-216, April. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? You may want to explore EconPapers, which displays the same data as IDEAS in a different way.

This page was last updated on 2009-10-27.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.