Testing the managerial timing ability: Evidence from stock repurchases in Japan

Ishikawa, Masaya; Takahashi, H.

doi:10.1016/j.frl.2010.05.003

Cited by 16 publications

(9 citation statements)

References 20 publications

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“…These results indicate that firms' managers are well informed and/or adept in identifying pricing error opportunities in the market. Our findings are in line with those of Ikenberry et al (1995Ikenberry et al ( , 2000 for the American and Canadian markets, and Ishikawa and Takahashi (2011) for the Japanese market.…”

Section: Discussionsupporting

confidence: 91%

“…Consistent with the hypothesis that a fixed-price tender is a more powerful signaling, this method showed a higher return than open-market repurchases by approximately 0.20% per month for the following 36 months. Ishikawa and Takahashi (2011) used Japanese data and a sample also formed by the two types of repurchases and found results that corroborate the hypothesis that managers at these companies are well informed and/or adept in identifying pricing errors in the market.…”

Section: Signalingmentioning

confidence: 56%

“…The second is formed by studies about the kinds of change occurring after the announcements, both in operational and financial terms (Bartov, 1991;Grullon & Michaely, 2004;Lie, 2005). There are also studies which test the profitability of investment strategies based on repurchase announcements or actual repurchases (Dittmar & Field, 2015;Ikenberry, Lakonishok & Vermaelen, 1995, Ishikawa & Takahashi, 2011, Yook, 2010. This article falls under this last strand.…”

Section: Introductionmentioning

confidence: 99%

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Underreaction to open market share repurchases,

Castro

Yoshinaga

2019

Rev. contab. finanç.

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This article aims to investigate the long-term performance of a portfolio of firms that announced the repurchase of their own stocks in the Brazilian market from 2003 to 2014. Open market stock repurchase is a means to distribute cashflow to shareholders. Some of the reasons for a firm to buy back its own stocks are: to adjust its capital structure; to reduce excessive cash levels; as an alternative to dividends; and signaling to the market in order to reduce information asymmetry between the firm and its investors. If the signaling hypothesis is true, then forming a portfolio with shares that announce repurchases generates abnormal returns in the long run. Our results show that repurchase announcements in the open market signal stock underpricing, and abnormal returns can be earned using this strategy. Results are inconsistent with the semi-strong form of the efficient markets hypothesis, which states that one cannot earn abnormal returns with publicly available information. We obtained abnormal returns using the capital asset pricing model (CAPM) and Fama and French three-factor model. Additionally, we divided the sample in growth and value firms. We found that the average abnormal return for firms that announce repurchase programs ranges from 5.4% to 7.9% for up to a 3-year period after the announcement. For value companies (more likely to repurchase stocks due to undervaluation), abnormal returns can reach up to 11.5% per year.

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Section: Discussionsupporting

confidence: 91%

Section: Signalingmentioning

confidence: 56%

Section: Introductionmentioning

confidence: 99%

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Underreaction to open market share repurchases,

Castro

Yoshinaga

2019

Rev. contab. finanç.

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“…For instance, Dann (1981), completed within three months (Lee, Jung, & Thornton, 2005). One extreme country is Japan, where regulators require firms to complete their program within 10 years (Ishikawa & Takahashi, 2011). Within the EU, and following several amendments to the directive 2006 (2006/68/EU andEUT L 264, p. 32), the former rule restricting share repurchases to a maximum of 10% of outstanding shares was removed.…”

Section: Introductionmentioning

confidence: 99%

Additional evidence on the frequency of share repurchases and managerial timing

Ridder

2015

The Quarterly Review of Economics and Finance

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“…Many studies report evidence of better operating or abnormal stock performances after the repurchase announcement for those firms with higher repurchase completion rates (Stephens and Weisbach, ; Ikenberry et al ., ; Lie, ; Zhang, ; Chan et al ., , ; Oded, ; Bonaimé, ; Wang et al ., ; Ishikawa and Takahashi, ). Only a few studies find that managers do not exhibit superior long‐term performances when they make open‐market actual repurchases (Rees, ; Rau and Vermaelen, ; McNally et al ., ).…”

mentioning

confidence: 97%

Earnings Surprises in Analysts' Forecasts, Mandatory Disclosure, and Share Repurchases

Liu

Chen

2015

Abacus

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This paper examines the impact of forecast errors and the mandatory disclosure of repurchase transactions required by 2003 Securities and Exchange Commission (SEC) regulations on share repurchases. We define forecast errors as the difference between analysts' forecasted earnings and actual earnings. We argue that firms with positive forecast errors imply greater information asymmetry, which may induce them to signal through share repurchases. We show that both the repurchase target and analysts' forecast revision are positively related to forecast errors. Furthermore, these associations are more pronounced in the low disclosure period (1989)(1990)(1991)(1992)(1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003) where greater information asymmetry between managers and outside investors is found, while increased transparency in the high disclosure period (2004)(2005)(2006) leads to more significant improvement in longterm performances for firms with positive forecast errors. The results are consistent with our expectations that the information asymmetry implied in forecast errors, along with a shock change from the introduction of the 2003 SEC regulation, affect both corporate and analysts' behaviour.

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Testing the managerial timing ability: Evidence from stock repurchases in Japan

Cited by 16 publications

References 20 publications

Underreaction to open market share repurchases,

Underreaction to open market share repurchases,

Additional evidence on the frequency of share repurchases and managerial timing

Earnings Surprises in Analysts' Forecasts, Mandatory Disclosure, and Share Repurchases

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