Early Mover Advantages in Financial Markets : Evidence from Stock Repurchases

We study herded stock repurchase using complete repurchase records from Chinese stock markets from 2005 to 2021. The data suggests that only repurchase decisions aiming to boost the stock price, among other purposes, significantly increase peer firms' tendency to follow. Such herding behavior does not correlate with firms' fundamentals nor affects peer firms’stock prices. Instead, herding intensity reduces the firms' abnormal returns from repurchasing, and firms' tendency to herd weakens after observing abnormal returns from repurchasing drop, consistent with firms taking the early-mover advantage to maximize abnormal returns. These results provide a novel explanation for oscillations in repurchase frequency and have critical policy implications. Regulators supervising emerging stock markets may scrutinize motivations for repurchases to ensure that listed firms do not abuse repurchase announcements to game the market