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Network Centrality and Managerial Market Timing Ability

Author

Listed:
  • Peress, Joël
  • Evgeniou, Theodoros
  • Vermaelen, Theo
  • Yue, Ling

Abstract

We document that long-run excess returns following announcements of share buyback authorizations and insider purchases are a U-shape function of firm centrality in the input-output trade flow network. These results conform to a model of investors endowed with a large but finite capacity for analyzing firms. Additional links weaken insiders’ informational advantage in peripheral firms (simple firms whose cash flows depend on few economic links) provided investors’ capacity is large enough, but eventually amplify that advantage in central firms (firms with many links) due to investors’ limited capacity. These findings shed light on the sources of managerial market timing ability.

Suggested Citation

  • Peress, Joël & Evgeniou, Theodoros & Vermaelen, Theo & Yue, Ling, 2020. "Network Centrality and Managerial Market Timing Ability," CEPR Discussion Papers 15240, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15240
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    More about this item

    Keywords

    Buybacks; Market timing; Network centrality; Insider trading; Market efficiency;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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