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Do open-market stock repurchases convey firm-specific or industry-wide information? Evidence from REITs

Author

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  • Gow-Cheng Huang

    (Tuskegee University)

  • Kartono Liano

    (Mississippi State University)

  • Ming-Shiun Pan

    (Shippensburg University)

Abstract

This study examines the extent of firm-specific and industry-level information conveyed in open-market stock repurchases announced by REITs. We measure information revealed in open-market stock repurchase announcements using stock return and decompose the stock return into firm-specific, industry-wide, and market components. We find that the announcement period return is mainly attributed to the firm-specific component. However, long-term returns following the announcement are largely due to the industry return components. We also find that changes in profitability are not related to the announcement abnormal return. Our results suggest that the repurchase signal is about the intrinsic value of a REIT rather than the REIT’s future prospect. Moreover, the repurchase signal is fully incorporated into the pricing process at the announcement.

Suggested Citation

  • Gow-Cheng Huang & Kartono Liano & Ming-Shiun Pan, 2019. "Do open-market stock repurchases convey firm-specific or industry-wide information? Evidence from REITs," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 43(2), pages 382-397, April.
    • Handle: RePEc:spr:jecfin:v:43:y:2019:i:2:d:10.1007_s12197-018-9463-9
    DOI: 10.1007/s12197-018-9463-9
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    More about this item

    Keywords

    Open-market stock repurchases; REITs; Firm-specific information; Industry-wide information;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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