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Market timing in open market bond repurchases

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  • Steinberg, Nadav
  • Wohl, Avi

Abstract

Bond repurchases are widespread in the US and other markets but data limitations have thus far prevented market-timing analysis. Using unique Israeli daily data we show that firms time the market in their actual open market bond repurchases. Bond repurchases typically follow price decline and result in significantly positive abnormal returns in the following days: about 1 % in five trading days. The market reaction is quicker within a pre-announced repurchase program, and it is stronger when the firm repurchases high-yield bonds or when the repurchase is preceded by positive net insider share purchases. The results lend support to the information motive for bond repurchases benefiting ongoing stakeholders but detrimental to selling bondholders.

Suggested Citation

  • Steinberg, Nadav & Wohl, Avi, 2024. "Market timing in open market bond repurchases," Journal of Banking & Finance, Elsevier, vol. 161(C).
    • Handle: RePEc:eee:jbfina:v:161:y:2024:i:c:s0378426624000141
    DOI: 10.1016/j.jbankfin.2024.107094
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    References listed on IDEAS

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