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Institutional investment horizons and open-market stock repurchases: evidence from the Taiwan stock market

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  • Lee-Young Cheng
  • Yu-En Lin

Abstract

This article investigates how the investment horizon of a firm's institutional shareholders affects the outcome of stock repurchase. Our results show that repurchasing firms with long-term institutional investors experience significantly positive abnormal returns around the repurchasing announcements, actually buy back more shares during the execution period, and perform better over a subsequent 3-year period than repurchasing firms with short-term institutional investors. These findings suggest that repurchasing firms held by long-term institutional investors can acquire certification- and monitoring-related benefits, thus providing more credible signals about the true value of firms.

Suggested Citation

  • Lee-Young Cheng & Yu-En Lin, 2012. "Institutional investment horizons and open-market stock repurchases: evidence from the Taiwan stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 22(8), pages 611-623, April.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:8:p:611-623
    DOI: 10.1080/09603107.2011.621878
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    1. Kenneth Lehn & Annette Poulsen, 1989. "Free Cash Flow and Stockholder Gains in Going Private Transactions," Journal of Finance, American Finance Association, vol. 44(3), pages 771-787, July.
    2. repec:bla:jfinan:v:44:y:1989:i:3:p:771-87 is not listed on IDEAS
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