Professor Panayiotis Andreou panayiotis.andreou@durham.ac.uk
Professor
Managerial overconfidence and the buyback anomaly
Andreou, P.C.; Cooper, I.; García de Olalla, I.; Louca, C.
Authors
I. Cooper
I. García de Olalla
C. Louca
Abstract
While positive, long-run abnormal returns following share repurchaseannouncements are substantially lower when CEOs are overconfident. This effect is particularly strong for (i) difficult to value firms, such as small, young, non-dividend paying, distressed, and having negative earnings firms, (ii) firms with poor past stock return performance and high book-to-market ratio, indicators of possible overreaction to bad news, and (iii) financially constrained firms. Overall, these results are consistent with the mispricing hypothesis as a motive for repurchases and as an explanation for the buyback anomaly. Additionally, irrespective of the CEO’s level of confidence, abnormal returns are considerably larger for financially constrained firms, implying their managers require larger undervaluation due to the higher cost of capital.
Citation
Andreou, P., Cooper, I., García de Olalla, I., & Louca, C. (2018). Managerial overconfidence and the buyback anomaly. Journal of Empirical Finance, 49, 142-156. https://doi.org/10.1016/j.jempfin.2018.09.005
Journal Article Type | Article |
---|---|
Acceptance Date | Sep 19, 2018 |
Online Publication Date | Sep 25, 2018 |
Publication Date | Dec 31, 2018 |
Deposit Date | Sep 25, 2018 |
Publicly Available Date | Mar 25, 2020 |
Journal | Journal of Empirical Finance |
Print ISSN | 0927-5398 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 49 |
Pages | 142-156 |
DOI | https://doi.org/10.1016/j.jempfin.2018.09.005 |
Public URL | https://durham-repository.worktribe.com/output/1318167 |
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http://creativecommons.org/licenses/by-nc-nd/4.0/
Copyright Statement
© 2018 This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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