Insider Trading and Firm Performance Following Open Market Share Repurchase Announcements

Journal of Business Finance and Accounting - Tập 41 Số 1-2 - Trang 156-184 - 2014
Hsuan‐Chi Chen, Sheng‐Syan Chen, Chia‐Wei Huang, John D. Schatzberg1
1Hsuan-Chi Chen and John Schatzberg are from the Anderson School of Management, University of New Mexico. Sheng-Syan Chen is from the Department of Finance, National Taiwan University. Chia-Wei Huang is from College of Management, Yuan Ze University, Taiwan. The authors thank an anonymous referee, Steven Young (associate Editor), Shao-Chi Chang, Dosoung Choi, Kim Wai Ho, Frank C. Jen, Cheng-few Lee, Jordan Levy, and seminar participants at National Cheng Kung University for their helpful comments and suggestions. Hsuan-Chi Chen gratefully acknowledges financial support from the Anderson School of Management of the University of New Mexico. (Paper received November, 2010, revised version accepted October, 2013).

Tóm tắt

Abstract

The long‐run performance of equity securities subsequent to announcements of open market repurchases (OMR) remains a contentious topic. In this paper we propose the “dichotomous expectations hypothesis” which posits that insider trading following share repurchase announcements reveals private information concerning the future operating performance of announcing firms. In particular, insider abnormal purchases (abnormal sales) should predict an improvement (decline) in operating performance that leads to higher (lower) long‐run stock returns. Our hypothesis offers a credible economic link between insider trading and subsequent long‐run stock performance through the intervening variable of operating performance. The empirical results show consistency with this linkage.

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Thông tin xuất bản

Journal of Business Finance and Accounting

Tập 41 Số 1-2

156-184

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