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

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

Publisher Statement

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Full-text Version

Publisher’s Version

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