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Insider Trading Effects on Stock Returns around Open-Market Stock Repurchase Announcements: An Empirical Study

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  • Raad, Elias
  • Wu, H K
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    Abstract

    In this paper we empirically examine the effects of insider trading activities, the percentage of common shares outstanding authorized for repurchase, and management ownership on stock returns around open-market stock repurchase announcements. The study is conducted on a sample of 204 firms that announced open-market stock repurchases between 1982 and 1990. Results show that insider trading activities during the month that immediately precedes the announcement have a significant effect. While stockholders of firms with insider net selling activities earn positive excess returns, those of firms with insider net buying activities earn larger and more significant excess returns. Insider trading activities during more distant periods do not show any effects on stock returns. Results also indicate that management ownership has a significant positive effect on stock returns, and this effect is more positive when the percentage of common shares outstanding authorized for repurchase is large.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 18 (1995)
    Issue (Month): 1 (Spring)
    Pages: 45-57

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    Handle: RePEc:bla:jfnres:v:18:y:1995:i:1:p:45-57

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0270-2592
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    Web page: http://www.southwesternfinance.org/
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    Cited by:
    1. Firth, Michael & Leung, T.Y. & Rui, Oliver M., 2010. "Double signals or single signal? An investigation of insider trading around share repurchases," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(4), pages 376-388, October.
    2. Edith Ginglinger & Jacques Hamon, 2009. "Share repurchase regulations: do firms play by the rules?," Post-Print halshs-00143974, HAL.
    3. Foued Hamouda & Mounira Ben Arab, 2013. "Board of directors and insider trading with share repurchase programs," Journal of Management and Governance, Springer, vol. 17(2), pages 405-418, May.

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