Network Centrality and Managerial Market Timing Ability : Evidence from Open-Market Repurchase Announcements

We document a U-shaped relation between long-run excess returns after buyback authorization announcements and firm centrality in the input-output trade flow network. We rationalize this finding in a model in which investors are endowed with a large but finite capacity for analyzing firms. Investors, therefore, have a better (resp. worse) understanding of peripheral (central) firms - whose cash flows depend on few (many) economic links - than the management, i.e. the insiders. Hence, additional links weaken insiders' informational advantage in peripheral firms but amplify that advantage in central firms. These results provide direct support for the market timing hypothesis of buybacks