Open‐Market Stock Repurchases by Insurance Companies and Signaling

Huang, Gow‐Cheng; Liano, Kartono; Manakyan, Herman; Pan, Ming‐Shiun

doi:10.1111/rmir.12003

Cited by 5 publications

(5 citation statements)

References 26 publications

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“…However, there are also different results. As an example of an alternative justification for firms' performance while trading own stock, and in a way disfavoring the market-timing hypothesis, Huang et al (2013) defend that abnormal returns are, in fact, due to undervaluation by the market and not due to positive information when announcing repurchases. They also state that firms repurchasing own stock do not tend to outperform other traders in the long run.…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Timing the market with own stock: an extensive analysis with buying and selling evidence

Santos

Gama

2019

IJMF

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Purpose Are firms able to time the market? The purpose of this paper is to focus on the study of own stock trading, emphasizing both repurchase and resell operations on the open market as well as over the counter. Design/methodology/approach The authors use data on 37,997 own stock transactions from 2005 to 2015 of Euronext Lisbon listed firms. Following Dittmar and Field (2015), this paper uses relative transaction prices to ascertain the relative performance of own stock transactions, in the open market and over the counter. Findings Results show that firms can time both repurchases as well as resales. Firms repurchase (resell) at lower (higher) prices than those prevailing in the market. Moreover, market-timing ability proves to be higher after the bailout period and to be influenced by the own stock trading frequency. Trading on the open market allows for increased timing ability for own stock repurchasing and reselling activity. Finally, results show seasonal effects both in repurchase and resale performance. Also, more efficient but less valuable firms are more likely to be successful in timing the market. Originality/value The authors study both the repurchasing and the reselling activity of the same set of firms, of already issued stock, using high-frequency (daily) data. In addition, the authors study own stock trading both in the open market and OTC, and also study the impact of a major economic shift on the firms’ ability to time the market.

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Section: Literature Reviewmentioning

confidence: 99%

“…Can firms time the market? There is a vast body of literature focusing on the ability to time the market through the use of own stock trading (Stephens and Weisbach, 1998;Ikenberry et al, 1995;Vermaelen and Ikenberry, 1996;Chan et al, 2004;Bonaimé and Ryngaert, 2013;Huang et al, 2013).…”

Section: Introductionmentioning

confidence: 99%

Timing the market with own stock: an extensive analysis with buying and selling evidence

Santos

Gama

2019

IJMF

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“…The Open-Market Repurchases (OMR) program is one of the hot topics studies in the current capital market, especially the main purpose of the implementation is to protect the interests of shareholders. Aimed at the fact whether OMR has the positive effect on CAR of share repurchase in the event period, there are some differences in the previous research results and these results are in contradiction with the argument of signaling undervaluation (Su & Lin, 2012;Huang, Liano, Manakyan, & Pan, 2013;Cheng & Hou, 2013); at the same time, the previous researches seldom analyze the effect of OMR in the event period on investor sentiment on the trading market from the perspective of behavioral finance, or only from the effect of market situations to analyze (Chen & Liu, 2018), not from the repurchase program in the stock price of risk, and emphasize the importance of systematic risk before the OMR.…”

Section: Introductionmentioning

confidence: 69%

Effects of the Pre-Repurchase Systematic Risk on the Relationship Between Investor Behavior, Market Factors and the Stock Price Responses

Liu

2018

Journal of Business Economics and Management

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This study explores the pre-repurchase systematic risk will affect the abnormal returns in the open-market repurchase event period and also change the relationship between the investor sentiment, trading activity, market factors and stock price response during the event on Taiwan stock market. Based on threshold regression models, it is found that the pre-repurchase systematic risk will significantly change the relationship between investor behavior, market factors and stock price responses and the asymmetry of the relationship exists when pre-repurchase systematic risk is lower than a repartition, which supports that institutional investors and credit trading investors differ in these existing relationships. When the pre-repurchase beta is below repartition, it will be detrimental to the returns in event period. But on the contrary, the returns in the short-term shock of news exposure period present the favorable results, which may be related to the fact that there exists sentiment premium in short-term when credit trading investors’ repurchase news exposure occurs. Finally, the study is to confirm the effect of systematic risk for returns and investor sentiment, these results have not been further explored in the past, and can be used as the firm’s evalu-ation reference to the repurchase program in the future.

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“…While some authors defend that firms have market timing abilities (see, for example, Stephens and Weishbach (1998); Ikenberry, Lakonishok and Vermaelen (1995); Vermaelen and Ikenberry (1996); Chan, Ikenberry and Lee (2004) and Bonaimé and Ryngaert (2013), others are not so keen of its presence while trading own stock; Huang, Liano, and Manakyan (2013).…”

Section: Introductionmentioning

confidence: 99%

“…However, there are also different results. As an example of an alternative justification for firms' performance while trading own stock, and in a way disfavouring the market timing hypothesis, Huang, Liano and Manakyan (2013) defend that abnormal returns are, in fact, due to undervaluation by the market and not due to positive information when announcing repurchases. They also state that firms repurchasing own stock do not tend to outperform other traders in the long run.…”

Section: Introductionmentioning

confidence: 99%

Can Firms Time the Market? Evidence Using Own Stock Transactions.

Santos¹,

Gama²

2017

Proceedings of the 6th Business &Amp; Management Conference, Geneva

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Can firms time the market? This paper uses hand collected data on 37997 own stock transactions from 2005 to 2015 of Euronext Lisbon listed companies to detect market timing for selling and buying transactions. Following Dittmar and Field (2015) the paper uses relative prices to ascertain the relative performance of own stock transactions. Results show that firms can time both repurchases as well as resales. Firms repurchase (resell) at lower (higher) prices than those prevailing in the market. Moreover, market timing ability proves to be higher after the bailout period and to be influenced by the own stock trading frequency. Trading on the open market allows for increased timing ability for own stock repurchasing and reselling activity. Finally, results show seasonality both in repurchases and resales performance.

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Open‐Market Stock Repurchases by Insurance Companies and Signaling

Cited by 5 publications

References 26 publications

Timing the market with own stock: an extensive analysis with buying and selling evidence

Timing the market with own stock: an extensive analysis with buying and selling evidence

Effects of the Pre-Repurchase Systematic Risk on the Relationship Between Investor Behavior, Market Factors and the Stock Price Responses

Can Firms Time the Market? Evidence Using Own Stock Transactions.

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