Purpose: This paper examines whether a greater firm’s repurchase intensity translates into more efficient stock price.
Design/Methodology/Approach: An unbalanced panel data, that consists of a sample of 337 US repurchasing firms between 2012 and 2016, was analyzed. Based on the result of the Hausman test, fixed effects estimator was employed to estimate the coefficients. To address heterogeneity across time and firms, time effect and standard error clustered by firms were applied.
Findings: Agreater firms’ share buyback intensity stimulates faster incorporation of information in price and results more efficient stock prices. The main findings were further confirmed with robustness test and supports the notion that share repurchase serves as signalling tool and price support to promote more efficient stock price.
Practical implication: The finding has implication on how share repurchase can be used in three ways: to ease panic selling and deep selling pressure during the downtime; enhance informed trading in which is a result of information signalled by managerial share repurchases; and attract investors’ attention on neglected and undervalued stock.
Originality/value: This research provides new insight and empirical evidence to reject public cynicism about share repurchases used by firms to manipulate their share prices.
|Number of pages||10|
|Journal||Turkish Journal of Computer and Mathematics Education|
|Publication status||Published - 5 Apr 2021|
- Price support
- Share repurchases
- Signalling hypothesis
- Stock market efficiency
- Stock price efficiency
ASJC Scopus subject areas
- Computational Mathematics
- Computational Theory and Mathematics