Double signals or single signal? An investigation of insider trading around share repurchases
We examine directors' dealing activity around share repurchasing periods in Hong Kong. There are significant insider trading activities before the share repurchasing period. Consistent with the signaling hypothesis, the directors' purchase activities during the share repurchase period are significantly higher than the expected level while the directors' sale activities are significantly lower than the expected level. Double signals of share repurchase and directors' purchases create a stronger signal in conveying undervaluation, while insider sales around share repurchase reduces the undervaluation signal. We find some evidence that is consistent with the free cash flow and signaling arguments for share repurchases.
Year of publication: |
2010
|
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Authors: | Firth, Michael ; Leung, T.Y. ; Rui, Oliver M. |
Published in: |
Journal of International Financial Markets, Institutions and Money. - Elsevier, ISSN 1042-4431. - Vol. 20.2010, 4, p. 376-388
|
Publisher: |
Elsevier |
Subject: | Signaling Share repurchases Insider trading |
Saved in:
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