Vinh Huy Nguyen, Suchismita Mishra, Pankaj K. Jain
{"title":"Institutional trading around repurchase announcements: An uphill battle","authors":"Vinh Huy Nguyen, Suchismita Mishra, Pankaj K. Jain","doi":"10.1111/fire.12302","DOIUrl":null,"url":null,"abstract":"<p>Highly sophisticated institutional investors are generally not profitable when trading around share repurchase announcements because they are pitted against better-informed entities such as the firm and its insiders. The firm and its insiders know the announcement's intention and timing and enjoy regulatory exemptions regarding the timing and pricing of repurchase implementation or lack thereof. Institutions do not have the same advantages or information ex ante, but they do have access to the trades of insiders 2 days after the transaction date. We find that some institutions are profitable but only when insiders’ buying signal matches the firm's repurchase signal.</p>","PeriodicalId":47617,"journal":{"name":"FINANCIAL REVIEW","volume":"57 3","pages":"485-507"},"PeriodicalIF":2.6000,"publicationDate":"2022-05-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"FINANCIAL REVIEW","FirstCategoryId":"1085","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/fire.12302","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
Highly sophisticated institutional investors are generally not profitable when trading around share repurchase announcements because they are pitted against better-informed entities such as the firm and its insiders. The firm and its insiders know the announcement's intention and timing and enjoy regulatory exemptions regarding the timing and pricing of repurchase implementation or lack thereof. Institutions do not have the same advantages or information ex ante, but they do have access to the trades of insiders 2 days after the transaction date. We find that some institutions are profitable but only when insiders’ buying signal matches the firm's repurchase signal.
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