Do share repurchases impact analysts' activity and informativeness ?
de La Bruslerie, Hubert (2019), Do share repurchases impact analysts' activity and informativeness ?, in Cheng-Few Lee, Advances in Quantitative Analysis of Finance and Accounting, vol. 16, World Scientific : Singapore, p. 267-309. 10.6293/AQAFA.201812_16.0009
Book titleAdvances in Quantitative Analysis of Finance and Accounting, vol. 16
Book authorCheng-Few Lee
Number of pages390
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Author(s)de La Bruslerie, Hubert
Dauphine Recherches en Management [DRM]
Abstract (EN)Share repurchases announcement are discretionary transactions that stimulate analyst's activity. We use the multi-dimensional concept of informativeness to capture the integration of information in the stock prices. Our empirical test comprises American and European buybacks in the period 2000-2013. We refer to three independent measures of informativeness: the synchronicity measure introduced by Roll (1988), the Amihud (2002) illiquidity ratio, and the Llorente, Michaely, Saar, and Wang (2002) measure. We relate these three measures to analysts' activity in earning forecasting. We show that share repurchase decisions initiate a process, stimulate revisions by analysts, but do not systematically improve the informativeness of stock prices. An effective information process may develop if first it is pegged on negative cumulative abnormal return (CAR) values, and/or if the analysts are revising downward their earnings forecasts. We also highlight that informativeness improves asymmetrically depending on whether a change in the dividend policy occurs simultaneously.
Subjects / KeywordsCumulative Abnormal Returns; Illiquidity Ratio; Synchronicity; Earning Forecasts Revisions
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