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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

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.

Suggested Citation

  • Chen, Sheng-Syan & Ho, Kim Wai & Huang, Chia-Wei & Wang, Yanzhi, 2013. "Buyback behavior of initial public offering firms," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 32-42.
    • Handle: RePEc:eee:jbfina:v:37:y:2013:i:1:p:32-42
    DOI: 10.1016/j.jbankfin.2012.08.006
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    Cited by:

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    2. Đorđe Đukić & Mališa Đukić, 2015. "Interdependencies of Markets in Southeastern Europe and Buyback of Shares on Shallow Capital Markets: The Application of Cointegration and Causality Tests," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(4), pages 469-491, September.
    3. Ioannis Dionysopoulos, 2013. "Olympic Games and their Commercialization," Ekonomika a Management, Prague University of Economics and Business, vol. 2013(4).
    4. Chen, Hung-Kun & Liang, Woan-lih, 2016. "Do venture capitalists improve the operating performance of IPOs?," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 291-304.

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    More about this item

    Keywords

    Initial public offering; Repurchase; Buyback;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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