Abstract
We examine directors’ dealing activity around share repurchasing periods in Hong Kong. There are significant insider trading activities before the share repurchasing period. Consistent with the signaling hypothesis, the directors’ purchase activities during the share repurchase period are significantly higher than the expected level while the directors’ sale activities are significantly lower than the expected level. Double signals of share repurchase and directors’ purchases create a stronger signal in conveying undervaluation, while insider sales around share repurchase reduces the undervaluation signal. We find some evidence that is consistent with the free cash flow and signaling arguments for share repurchases.
| Original language | English |
|---|---|
| Pages (from-to) | 378-388 |
| Number of pages | 11 |
| Journal | Journal of International Financial Markets, Institutions and Money |
| Volume | 20 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - 1 Oct 2010 |
Funding
sWe thank the reviewer and Geoffrey Booth, the editor, for helpful comments on the paper. The paper was initiated when Oliver Rui was visiting the Hong Kong Institute of Monetary Research. The views expressed in this paper are those of the authors, and do not necessarily reflect those of the Hong Kong Institute for Monetary Research, its Council of Advisors, or the Board of Directors. Firth acknowledges financial support from the Government of the HKSAR (LU340307).
Keywords
- Signaling; Share repurchases; Insider trading