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)1 - 12
Number of pages12
JournalInternational Journal of Finance and Economics
Volume2020
Early online date26 Jul 2020
DOIs
Publication statusE-pub ahead of print - 26 Jul 2020

Structured keywords

  • AF Financial Markets

Keywords

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

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