Title
Double signals or single signal? An investigation of insider trading around share repurchases
Document Type
Journal article
Source Publication
Journal of International Financial Markets, Institutions and Money
Publication Date
10-1-2010
Volume
20
Issue
4
First Page
378
Last Page
388
Publisher
Elsevier BV
Keywords
Signaling; Share repurchases; Insider trading
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.
DOI
10.1016/j.intfin.2010.05.002
Print ISSN
10424431
E-ISSN
18730612
Funding Information
Firth acknowledges financial support from the Government of the HKSAR (LU340307).
Publisher Statement
Copyright © 2010 Elsevier B.V. All rights reserved.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Firth, M., Leung, T. Y., & Rui, O. M. (2010). Double signals or single signal? An investigation of insider trading around share repurchases. Journal of International Financial Markets, Institutions and Money, 20(4), 376-388. doi: 10.1016/j.intfin.2010.05.002
