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Interpreting the Repurchase Signal

Truedsson, Alexander LU and Kindstrand, Adam LU (2018) BUSN79 20181
Department of Business Administration
Abstract
The purpose of this study is to examine the potential of improving the interpretation of signals of undervaluation inherent to share repurchases, by accounting for insider trading, level of insider and cash holdings. The goal is to contribute to decreased information asymmetry and increased efficiency in capital markets.

The study performs a long-horizon event study, applying buy-and-hold abnormal return as primary measure. In order to assess abnormal returns three years post-event, with the primary event of interest being share repurchases concurrent with insider trading.

The study is based on previous research regarding share repurchases, insider trading and the combination of the two in terms of signaling.

The sample of the... (More)
The purpose of this study is to examine the potential of improving the interpretation of signals of undervaluation inherent to share repurchases, by accounting for insider trading, level of insider and cash holdings. The goal is to contribute to decreased information asymmetry and increased efficiency in capital markets.

The study performs a long-horizon event study, applying buy-and-hold abnormal return as primary measure. In order to assess abnormal returns three years post-event, with the primary event of interest being share repurchases concurrent with insider trading.

The study is based on previous research regarding share repurchases, insider trading and the combination of the two in terms of signaling.

The sample of the study consists of 231 observations. These observations consist of firms listed on the Stockholm Stock Exchange, and have performed material share repurchases in any quarter during the period ranging from year 2000 to year 2014. The data were gathered from Datastream, Eikon, Holdings, Finansinspektionen and Nasdaq.

The study concludes that; Firms with insider buying concurrent to share repurchases obtain higher abnormal returns than non-buying repurchasing firms, CEO insider buying concurrent with share repurchases obtain higher abnormal returns than other insider buying concurrent with share repurchases, Repurchasing firms with lower levels of cash obtain higher abnormal returns than repurchasing firms with higher levels of cash. (Less)
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author
Truedsson, Alexander LU and Kindstrand, Adam LU
supervisor
organization
course
BUSN79 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
Information asymmetry, Insider trading, Share repurchases, Undervaluation, Abnormal returns, Signaling.
language
English
id
8945683
date added to LUP
2018-06-27 14:19:30
date last changed
2018-06-27 14:19:30
@misc{8945683,
  abstract     = {The purpose of this study is to examine the potential of improving the interpretation of signals of undervaluation inherent to share repurchases, by accounting for insider trading, level of insider and cash holdings. The goal is to contribute to decreased information asymmetry and increased efficiency in capital markets.

The study performs a long-horizon event study, applying buy-and-hold abnormal return as primary measure. In order to assess abnormal returns three years post-event, with the primary event of interest being share repurchases concurrent with insider trading.

The study is based on previous research regarding share repurchases, insider trading and the combination of the two in terms of signaling. 

The sample of the study consists of 231 observations. These observations consist of firms listed on the Stockholm Stock Exchange, and have performed material share repurchases in any quarter during the period ranging from year 2000 to year 2014. The data were gathered from Datastream, Eikon, Holdings, Finansinspektionen and Nasdaq.

The study concludes that; Firms with insider buying concurrent to share repurchases obtain higher abnormal returns than non-buying repurchasing firms, CEO insider buying concurrent with share repurchases obtain higher abnormal returns than other insider buying concurrent with share repurchases, Repurchasing firms with lower levels of cash obtain higher abnormal returns than repurchasing firms with higher levels of cash.},
  author       = {Truedsson, Alexander and Kindstrand, Adam},
  keyword      = {Information asymmetry,Insider trading,Share repurchases,Undervaluation,Abnormal returns,Signaling.},
  language     = {eng},
  note         = {Student Paper},
  title        = {Interpreting the Repurchase Signal},
  year         = {2018},
}