Stock repurchases and market efficiency: Evidence from Hong Kong

We exploit unique institutional features of the Hong Kong Stock Exchange — next-day disclosure rules, statutory blackout periods, and a strict 5% price lockout limit — to identify the microstructural mechanism of corporate share repurchases. Using a stacked difference-in-differences framework and a blackout-based instrumental variable, we address endogeneity and treatment timing biases to establish a causal link: actual repurchases reduce idiosyncratic volatility and price delay. Capitalizing on the exogenous 5% price lockout rule, we document an immediate deterioration in market quality when corporate limit orders are mechanically withdrawn, confirming a physical liquidity provision channel. Furthermore, unlike the asymmetric “buyer of last resort” effect documented in the U.S., we find that repurchases in a retail-dominated, pure limit order market yield symmetric efficiency gains across both bullish and bearish states. Our findings demonstrate that repurchasing firms act as continuous “quasi-market makers”, absorbing idiosyncratic noise regardless of macroeconomic conditions.