Working paper
Do Managers Provide Misleading Earnings Guidance Before Stock Repurchases?
SSRN
02/06/2016
DOI: 10.2139/ssrn.2727912
Abstract
We point out several methodological flaws in previous research that concludes that managers mislead shareholders into selling their stock for too cheap by releasing overly negative information before stock repurchases. In particular, this research relies primarily on measured market reaction to management guidance which suffers from endogeneity concerns. Using a sample of 3,181 repurchase firms and matching rival firms during 2003-2012, we find insignificant differences between their frequencies of management guidance, the implied earnings updates, and the closeness of earnings guidance to actual earnings. In contrast, there is a significant difference in market reaction to guidance, which is 1.5% lower for repurchase firms than for rival firms after accounting for differences in earnings updates and other information. Our evidence suggests that repurchases occur in response to investor misreaction to management guidance, but we find no evidence to suggest that managers mislead investors before this dominant form of shareholder returns
Details
- Title: Subtitle
- Do Managers Provide Misleading Earnings Guidance Before Stock Repurchases?
- Creators
- Amrita Nain - University of IowaAnand M Vijh - University of Iowa, Finance
- Resource Type
- Working paper
- Publisher
- SSRN
- DOI
- 10.2139/ssrn.2727912
- Number of pages
- 42 pages
- Language
- English
- Date posted
- 02/06/2016
- Academic Unit
- Finance
- Record Identifier
- 9984380589802771
Metrics
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