The Decision to Repurchase, Announcement Returns and Insider Holdings: A Conditional Event Study (ABSTRACT)
W. McNally & K. Li
published: 2003 | Research publication | Refereed Journals - Finance
McNally, W., & K. Li (2003). "The Decision to Repurchase, Announcement Returns and Insider Holdings: A Conditional Event Study." The ICFAI Journal of Applied Finance, 9 (6), 55-70.
ABSTRACT: This study examines the role of insider holdings in affecting the decision to announce a repurchase and the associated announcement period stock returns using a conditional event study methodology. We find that firms are more likely to buy back shares if the insiders have large shareholdings and we find that the announcement period returns are greater for firms where insiders have larger holdings. We examine the role of insider holdings in the context of several hypotheses, which explain why firms repurchase and why the market reacts to the announcement. We find considerable support for Isagawa's (2000) model, which argues that firms repurchase to signal that they will not waste their free cash flow.
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revised Apr 9/07
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