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Buyback behavior of initial public offering firms

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  • Chen, Sheng-Syan
  • Ho, Kim Wai
  • Huang, Chia-Wei
  • Wang, Yanzhi
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    Abstract

    We examine the motives behind the share repurchase decisions of initial public offering (IPO) firms by studying the stock and operating performance after the IPO date. We find that IPO firms that announce repurchases within 3years of IPO dates exhibit poorer long-run abnormal operating performance than other IPO firms. These IPO firms also experience poorer stock return performance and downward analyst forecast revisions. Moreover, these firms show intensive insider selling transactions after the IPO date. These results for IPO announcing repurchase firms are consistent with the misleading hypothesis, which suggests that these IPO firms mislead investors by announcing repurchases as false signals.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 37 (2013)
    Issue (Month): 1 ()
    Pages: 32-42

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    Handle: RePEc:eee:jbfina:v:37:y:2013:i:1:p:32-42

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Initial public offering; Repurchase; Buyback;

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    Cited by:
    1. Hahl, Teemu & Vähämaa, Sami & Äijö, Janne, 2014. "Value versus growth in IPOs: New evidence from Finland," Research in International Business and Finance, Elsevier, Elsevier, vol. 31(C), pages 17-31.

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