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Opportunistic Stock Repurchases for Owner–Manager Control: Evidence from the Korean Stock Market
Author(s) -
Kim Kyung Soon,
Chung Chune Young,
Lee Jin Hwon,
Park Seun Young
Publication year - 2016
Publication title -
asia‐pacific journal of financial studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.375
H-Index - 15
eISSN - 2041-6156
pISSN - 2041-9945
DOI - 10.1111/ajfs.12131
Subject(s) - business , share repurchase , insider , stock (firearms) , accrual , earnings management , monetary economics , information asymmetry , finance , earnings , corporate governance , economics , shareholder , mechanical engineering , political science , law , engineering
We examine whether opportunistic earnings management before a repurchase and long‐term performance after a repurchase depend on repurchase options and insider ownership. We find that the negative association between pre‐stock repurchase earnings management and abnormal long‐term performance after stock repurchase is more pronounced when firms choose the direct stock repurchase method over an indirect repurchase through a trust fund. Our findings also show that the negative association between pre‐repurchase accruals and long‐term performance under direct stock repurchases is only evident when the ownership percentage of managers and their affiliates is less than 50%. In addition, our main findings are more pronounced in firms with a high degree of corporate information asymmetry.