OPEN MARKET REPURCHASES AND STOCK PRICE INFORMATIVENESS: EVIDENCE FROM MALAYSIA STOCK MARKET

Abstract

Abstract

The aim of research paper is to examine the effect of stock price informativeness, which is conveyed by stock prices, on firm’s open market repurchases (OMRs) activity. The finding of study is to provide evidence of presence of managerial learning whereby managers could use firm-specific stock return variation to buy back their shares via open market. Evidence is found in the subsample analysis where target sample is separated to two subsamples periods and test separately based on stock market performance. The finding of the 1^st subsample (Q12008-Q42013) for OMRs activity indicates that variation of stock return and firm size significantly and positively explains OMRs activity. The finding of 1^st subsample is robust in terms of random and fixed effect model. The finding implies that managers observed and learned information from firm-specific variation in stock return during financial crisis and recovery periods when performing open market repurchases.

 Keywords: Open market repurchase, managerial learning hypothesis, stock price informativeness, firm-specific return variation, informed trading.