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Herd to repurchase

Author

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  • Li, Dongxu
  • Zou, Ruiyang

Abstract

We study herding behavior in stock repurchasing using complete repurchase records from Chinese stock markets for the period 2005 to 2021. The data suggest that only repurchase decisions aiming to boost the stock price, among other purposes, significantly increase peer firms' tendency to follow. Such herding behavior does not correlate with firms' fundamentals. Instead, herding intensity reduces firms' abnormal returns from repurchasing, and firms' tendency to herd weakens after observing abnormal returns from repurchasing drop, consistent with firms taking the early-mover advantage to maximize abnormal returns. These results provide a novel explanation for oscillations in repurchase frequency and have critical policy implications. Regulators supervising emerging stock markets should scrutinize motivations for repurchases to ensure that listed firms do not abuse repurchase announcements to game the market.

Suggested Citation

  • Li, Dongxu & Zou, Ruiyang, 2025. "Herd to repurchase," Pacific-Basin Finance Journal, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001192
    DOI: 10.1016/j.pacfin.2025.102782
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    More about this item

    Keywords

    Herding; Early-mover advantage; Repurchase;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G40 - Financial Economics - - Behavioral Finance - - - General

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