Journal of Applied Finance & Banking

The Impact of the Company's Market Timing on Insider Trading of Repurchase Announcement

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• Abstract

  In this study, we explore the influence of market timing on insider trading and buy-and-hold abnormal returns by the sample of Taiwan listed companies at stock exchange market and the firms at over-the-counter (OTC) market from 2001 to 2016. According to Dittmar and Field [7], we use the relative repurchase price (RRP) to measure the strength of market timing abilities when firm repurchases its own stock. We find that the stronger market timing ability is accompanied with the greater insider net buying. Thus, insiders can indeed know the company’s future information when firms repurchase. In addition, when market timing abilities of the OTC firms are stronger, their insiders net buy transaction have greater influence on future buy-and-hold returns. We also find that the firm with smaller market value has lower credibility of stock repurchase, the more information content of insider transaction and the more future buy-and-hold abnormal return.

  JEL classification numbers: G11, G14
  Keywords: share repurchase, market timing, insider trading, buy-and-hold abnormal return.