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Anticipating the value of share repurchase announcements: The role of short sellers
Author(s) -
Zheng Liyi
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1974
Subject(s) - information asymmetry , incentive , monetary economics , value (mathematics) , economics , investment (military) , business , relation (database) , microeconomics , database , machine learning , politics , computer science , political science , law
This study investigates whether short sellers anticipate undervaluation information before a repurchase announcement. Apart from exploring investment opportunities via searching for unfavourable information, short sellers should have the same incentive to identify favourable 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.