The Price Effect of Stock Repurchases: Evidence from Dual Class Firms

2021 ◽  
Author(s):  
Leonce Bargeron ◽  
Michael Farrell
Keyword(s):  
Private Information ◽  
Firm Value ◽  
Stock Price ◽  
Stock Repurchases ◽  
Price Effect ◽  
Self Interest ◽  
Dual Class

We examine a sample of dual-class firms to isolate the magnitude and duration of the demand-driven price effect from stock repurchases. In this novel setting, the non-repurchased class serves as a near-perfect counterfactual to the repurchased class and controls for private information about firm value contained in the repurchases. The average repurchase in our sample, 0.30% of outstanding shares within a month, increases the stock price by 40 to 70 basis points relative to the non-repurchased class of stock. The effect dissipates completely over the subsequent month unless extended by continued repurchases. This small, short-lived price effect leaves little scope for CEOs to benefit from value-destroying repurchases motivated by self-interest. This paper was accepted by Victoria Ivashina, finance.

Pengaruh Intellectual Capital, Profitabilitas, Dan Leverage Terhadap Nilai Perusahaan Pada Perusahaan Sektor Properti, Real Estate, Dan Konstruksi Bangunan Yang Terdaftar Di Bursa Efek Indonesia

2018 ◽  
Vol 9 (2) ◽  
pp. 1-14
Author(s):  
Haryani Chandra ◽  
Hamfri Djajadikerta
Keyword(s):  
Real Estate ◽  
Intellectual Capital ◽  
Firm Value ◽  
Stock Price ◽  
Stock Exchange ◽  
Value Added ◽  
Simple Random Sampling ◽  
Positive Influence ◽  
Public Companies ◽  
Equity Ratio

Go public companies have main purpose to increase firm value consistently. Increased firm value can reflect the increase in the prosperity of shareholders. The purpose of this research is to determine whether intellectual capital, profitability, and leverage have an influence on firm value. This research is expected to help companies to determine the focus on managing the factors those have an influence towards firm value and help investors and potential investors to make investment decisions. This research is conducted on firms listed in property, real estate, and building construction sector in Indonesia Stock Exchange during 2010 until 2015. Samples are selected by simple random sampling method. The research method used is the regression analysis. Intellectual capital is measured by value added intellectual coefficient (VAIC), profitability is measured by return on assets (ROA), leverage is measured by debt- to-equity ratio (DER), and firm value is measured by the year-end closing stock price. The results showed that intellectual capital, profitability, and leverage have partially a significant positive influence on firm value. In addition, intellectual capital, profitability, and leverage have significant influence simultaneously on firm value. Keywords: firm value, intellectual capital, leverage, profitability

Analysts' Information Acquisition and Stock Price Synchronicity: A Regulatory Perspective from China

2018 ◽  
Vol 33 (1) ◽  
pp. 153-179 ◽  
Author(s):  
Haiyan Jiang ◽  
Donghua Zhou ◽  
Joseph H. Zhang
Keyword(s):  
Insider Trading ◽  
Private Information ◽  
Stock Prices ◽  
Information Acquisition ◽  
Stock Price ◽  
Specific Information ◽  
Stock Price Synchronicity ◽  
Playing Field ◽  
Information Advantage ◽  
Private Information Acquisition

SYNOPSIS Against the backdrop of the Chinese Directive 40 (China's Reg FD) issued in 2007 as an attempt to curb insider trading and to level the information playing field, this study investigates whether analysts' private information acquisition influences the extent to which firm-specific information is impounded into stock prices, i.e., stock price synchronicity, and how the restrictions on selective disclosures imposed by Directive 40 have shaped the relationship between analyst information acquisition and synchronicity. Using a pre-Directive 40 sample, we show that synchronicity is negatively related to analysts' private information acquisition, which provides support for the “information advantage” argument of analysts' information production. However, the ability of analysts' private information acquisition in improving firm-specific information incorporated into stock price is mitigated post-Directive 40 due to a restriction on selective disclosures and/or private communication. Moreover, we find that this regulatory impact varies for firms being followed by affiliated analysts versus non-affiliated analysts. JEL Classifications: G14; G15; G17; G18.

Do Managers Disclose or Withhold Bad News? Evidence from Short Interest

2018 ◽  
Vol 94 (3) ◽  
pp. 1-26 ◽  
Author(s):  
Dichu Bao ◽  
Yongtae Kim ◽  
G. Mujtaba Mian ◽  
Lixin (Nancy) Su
Keyword(s):  
Private Information ◽  
Voluntary Disclosure ◽  
Stock Price ◽  
Data Availability ◽  
Bad News ◽  
General Tendency ◽  
Litigation Risk ◽  
Novel Approach ◽  
Conflicting Evidence ◽  
Short Interest

ABSTRACT Prior studies provide conflicting evidence as to whether managers have a general tendency to disclose or withhold bad news. A key challenge for this literature is that researchers cannot observe the negative private information that managers possess. We tackle this challenge by constructing a proxy for managers' private bad news (residual short interest) and then perform a series of tests to validate this proxy. Using management earnings guidance and 8-K filings as measures of voluntary disclosure, we find a negative relation between bad-news disclosure and residual short interest, suggesting that managers withhold bad news in general. This tendency is tempered when firms are exposed to higher litigation risk, and it is strengthened when managers have greater incentives to support the stock price. Based on a novel approach to identifying the presence of bad news, our study adds to the debate on whether managers tend to withhold or release bad news. Data Availability: Data used in this study are available from public sources identified in the study.

Audit quality within adverse selection markets

2016 ◽  
Vol 24 (1) ◽  
pp. 2-18 ◽  
Author(s):  
Bharat Sarath
Keyword(s):  
Private Information ◽  
Stock Price ◽  
Audit Quality ◽  
Information Economics ◽  
Economic Market ◽  
Financial Reports ◽  
Content Type ◽  
General Terms ◽  
Audit Regulation ◽  
Short Run

Purpose – Auditing may be viewed as an arrangement for reducing inefficiencies arising from the fundamental market conflict between a seller who wants as high a price as possible and a buyer who wants to pay as low a price as possible. In more general terms, sellers prefer policies that boost the stock price in the short run whereas buyers would prefer the price to peak when they are ready to sell some time in the future. By framing audited financial reports within this context, the purpose of this paper is to provide some insights regarding both audit institutions and audit regulation. Design/methodology/approach – This paper relies on conceptual arguments and a simple analytical model. Findings – The basic findings are that a unique definition of audit quality is not compatible with the economics of a market where there are conflicts across traders as well a possibility that some traders hold superior information to others. Even an identification of quality with accuracy fails in this setting of conflict. The inference is that audit quality should be approached from a multi-dimensional perspective rather than a unique measure. Research limitations/implications – While the paper points out difficulties in constructing measures of audit quality extant in the literature, it does not provide any clear empirical suggestions for better measures. Originality/value – The paper brings back into focus issues from information economics that form the bedrock for the study of audited financial statements in equity markets. While the paper is partially a survey and synthesis of some of the latest empirical findings, it describes them within the context of a rational economic market where traders may possess private information. Within such a market, the paper outlines both the conflicts and the benefits inherent to the current institutional arrangements where auditors are paid by incumbent shareholders and overseen by regulators.

scholarly journals Feedback Effects, Asymmetric Trading, and the Limits to Arbitrage

2015 ◽  
Vol 105 (12) ◽  
pp. 3766-3797 ◽  
Author(s):  
Alex Edmans ◽  
Itay Goldstein ◽  
Wei Jiang
Keyword(s):  
Private Information ◽  
Firm Value ◽  
Bad News ◽  
Good News ◽  
Asymmetric Effect ◽  
Trading Behavior ◽  
Feedback Effects ◽  
Limits To Arbitrage ◽  
Corporate Decisions ◽  
Fundamental Value

We analyze strategic speculators’ incentives to trade on information in a model where firm value is endogenous to trading, due to feedback from the financial market to corporate decisions. Trading reveals private information to managers and improves their real decisions, enhancing fundamental value. This feedback effect has an asymmetric effect on trading behavior: it increases (reduces) the profitability of buying (selling) on good (bad) news. This gives rise to an endogenous limit to arbitrage, whereby investors may refrain from trading on negative information. Thus, bad news is incorporated more slowly into prices than good news, potentially leading to overinvestment. (JEL D83, G12, G14)

scholarly journals PENGARUH GOOD CORPORATE GOVERNANCE TERHADAP NILAI PERUSAHAAN DENGAN PROFITABILITAS SEBAGAI VARIABEL INTERVENING (Studi Pada Perusahaan Perbankan Di Bursa Efek Indonesia)

2018 ◽  
Vol 5 (2) ◽  
pp. 45-58
Author(s):  
G. A Sri Oktaryani ◽  
I Nyoman Nugraha Ardana P ◽  
Iwan Kusuma Negara ◽  
Siti Sofiyah ◽  
I Gede Mandra
Keyword(s):  
Corporate Governance ◽  
Firm Value ◽  
Stock Price ◽  
Banking Sector ◽  
Negative Impact ◽  
Positive Impact ◽  
Stock Exchange ◽  
Return On Equity ◽  
Good Corporate Governance ◽  
Significant Direct Effect

This research examines the effect of Good Corporate Governance (GCG) on firm value by using profitability as intervening variable.  Profitability is proxied by Return On Asset (ROA) and Return On Equity (ROE). This study used a quantitative approach and path analysis. The population consists of 35 firms that were listed in Banking sector of Indonesian Stock Exchange over period 2013 – 2015. There are 34 firms are choosen as samples which has published GCG composit index throughout observation years and has not done corporate action that could affect the stock price directly. The findings show that GCG has positive and significant direct effect on firm value. Furthermore, ROA has positive impact on firm value; meanwhile ROE has negative impact on firm value. The results also show that the better the implementation of GCG the higher the Return on Asset. Moreover, the indirect effect of GCG on firm value through profitability is not significant. Keywords: GCG, profitability, ROA, ROE, firm value.

scholarly journals RELEVANSI NILAI MODAL INTELEKTUAL (PENDEKATAN RETURN ON ASSETS DAN MARKET CAPITALIZATION METHOD)

2020 ◽  
Vol 13 (2) ◽  
Author(s):  
Jessy Malinda ◽  
Dyna Rachmawati
Keyword(s):  
Intellectual Capital ◽  
Firm Value ◽  
Stock Price ◽  
Value Relevance ◽  
Control Variable ◽  
Value Added ◽  
Share Price ◽  
Resource Based View ◽  
Message Boards ◽  
Purposive Sampling

<p><strong><em>ABSTRACT</em></strong><strong><em>: </em></strong><em>Value relevance is the ability of a value in explaining information about company's valuation. Company valuation has a connection with the investors and their investment decisions. Based on the Resource Based View (RBV) theory, well-managed intellectual capital can generate value added and future competitive advantage for the company. This value added and competitive ability can affect investor's decision to make an investment in the company. This investment decision means the demand for company shares are increasing and along with this increase, the company’s market share price also increases. The increase in company's stock price will increase the value of the company.</em><strong><em></em></strong><em> This quantitative research aims to examine and analyze the value relevance of intellectual capital. Intellectual capital in this study measured using the Value Added Intellectual Coefficient (VAIC<sup>TM</sup>) method, Intellectual Capital Index (ICI), and through Yahoo Finance's Internet Message Boards (IMBs). The independent variable in this study is intellectual capital, the dependent variable used is firm value, and the control variable is size of the company used in this study. This research samples was selected using purposive sampling method on the companies registered in Kompas100 for the period of July 2019. Data analysis in this study used multiple linear regression.The results of this study conclude that intellectual capital measured using VAIC<sup>TM</sup> and through Yahoo Finance IMBs has no value relevance. Whereas intellectual capital which is measured using ICI has value relevance. These results indicate that ICI is the most appropriate proxy for measuring intellectual capital.</em><em></em></p><p><strong><em>Keywords: </em></strong><em> </em><em>v</em><em>alue relevance, intellectual capital</em><em>, firm value, company size</em></p><p><strong>ABSTRAK</strong>: Relevansi nilai merupakan kemampuan suatu nilai dalam menjelaskan informasi mengenai penilaian suatu perusahaan. Penilaian suatu perusahaan memiliki kaitan dengan investor dan keputusan investasinya. Berdasarkan teori Resource Based View (RBV), modal intelektual yang dikelola dengan baik dapat menghasilkan nilai tambah dan keuntungan kompetitif di masa depan bagi perusahaan. Nilai tambah dan kemamppuan kompetitif ini dapat mempengaruhi pengambilan keputusan investor untuk memberikan investasi pada perusahaan. Adanya keputusan investasi pada perusahaan berarti permintaan atas saham perusahaan meningkat dan seiring dengan peningkatan ini, harga pasar saham perusahaan ikut meningkat. Peningkatan pada harga saham perusahaan akan memberikan kenaikan pada nilai perusahaan. Penelitian kuantitatif ini bertujuan untuk menguji dan menganalisis relevansi nilai modal intelektual. Modal intelektual dalam penelitian ini diukur dengan menggunakan metode <em>Value Added Intellectual Coefficient</em> (VAIC<sup>TM</sup>), <em>Intellectual Capital Index</em> (ICI), dan melalui <em>Internet Message Boards</em> (IMBs) Yahoo Finance. Variabel independen dalam penelitian ini adalah modal intelektual, variabel dependen yang digunakan adalah nilai perusahaan, dan variabel kontrol yaitu ukuran perusahaan digunakan dalam penelitian ini. Sampel penelitian dipilih menggunakan metode purposive sampling pada perusahaan yang terdaftar di Kompas100 periode Juli 2019. Analisis data dalam penelitian ini menggunakan regresi linear berganda. Hasil penelitian ini menyimpulkan bahwa modal intelektual yang diukur menggunakan VAIC<sup>TM</sup> dan melalui IMBs Yahoo Finance tidak memiliki relevansi nilai. Sedangkan modal intelektual yang diukur menggunakan ICI memiliki relevansi nilai. Hasil ini menunjukkan bahwa ICI merupakan proksi yang paling tepat untuk digunakan dalam mengukur modal intelektual.</p><p><strong>Kata Kunci:</strong> relevansi nilai, modal intelektual, nilai perusahaan, ukuran perusahaan</p>

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