Anticipating the Value of Share Repurchase Announcements: The Role of Short Sellers

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Abstract

This study investigates whether short sellers anticipate undervaluation information before a repurchase announcement. Apart from exploring investment opportunities via searching for unfavorable information, short sellers should have the same incentive to identify favorable information to prevent potential losses. An observed significant negative relation between pre-announcement short selling activities and announcement abnormal returns supports the informed hypothesis. This negative relation is stronger under high levels of information asymmetry, and more significant when the repurchase announcement is associated with the undervaluation.
Original languageEnglish
Pages (from-to)3544 - 3555
Number of pages12
JournalInternational Journal of Finance and Economics
Volume26
Issue number3
Early online date26 Jul 2020
DOIs
Publication statusPublished - 7 Jul 2021

Bibliographical note

Funding Information:
The author gratefully acknowledge helpful comments and suggestions received from the two anonymous referees, George Bulkley, Ian Tonks, and conference participants at the British Accounting and Finance Association (BAFA) annual conferences, 2018, London.

Publisher Copyright:
© 2020 The Authors. International Journal of Finance & Economics published by John Wiley & Sons Ltd.

Structured keywords

  • AF Financial Markets

Keywords

  • share repurchases
  • short selling
  • informed trading
  • information asymmetry
  • undervaluation

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