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The effect of managerial overconfidence on the market timing ability and post-buyback performance of open market repurchases

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  • Chen, Anlin
  • Lu, Cheng-Shou

Abstract

This paper investigates whether managerial overconfidence has an adverse impact on the market timing ability and post-buyback performance of open market repurchases, and whether corporate governance can mitigate the adverse impact in Taiwan. We find that managerial overconfidence raises the repurchase cost implying an adverse impact on the market timing ability of share repurchases. The repurchasing firms with overconfident managers experience poorer short-run announcement return and long-run stock performance than those without overconfident managers because of the poorer market timing ability and the higher repurchase cost. However, corporate governance mitigates the adverse impacts of managerial overconfidence on the market timing ability and post-buyback performance of repurchases.

Suggested Citation

  • Chen, Anlin & Lu, Cheng-Shou, 2015. "The effect of managerial overconfidence on the market timing ability and post-buyback performance of open market repurchases," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 234-251.
    • Handle: RePEc:eee:ecofin:v:33:y:2015:i:c:p:234-251
    DOI: 10.1016/j.najef.2015.05.001
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    5. Tolossa Fufa Guluma, 2021. "The impact of corporate governance measures on firm performance: the influences of managerial overconfidence," Future Business Journal, Springer, vol. 7(1), pages 1-18, December.

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