Can Company Managers Time Share Buybacks?

Stock repurchase refers to the act of a listed company to buy back a certain amount of its outstanding shares from the stock market by cash or other means.Among the repurchase options available,open market repurchase is the most common repurchase option.Since most share buybacks involve companies buying back shares from the public stock market at market prices,it is worth paying attention to whether the company's managers can seize the market timing when making buyback decisions and buy back shares at relatively low prices.Most of the existing researches focus on the motivation behind stock repurchase and the influence of stock repurchase,but there are few researches on the timing of stock repurchase.In addition,there is a lack of sufficient research support on what factors affect the timing performance of managers' stock buybacks.Therefore,based on relevant theories and combined with the practice of share repurchase in China's a-share market,this paper studies these two issues.This paper firstly analyzes the existence of managers' stock repurchase timing theoretically,and analyzes the influencing factors of managers' stock repurchase timing performance mainly from the perspective of stock liquidity and excess rate of return before stock repurchase.The theories of managers' repurchase timing include information asymmetry theory,principal-agent theory and market timing theory,which respectively explain the existence of managers' repurchase timing from the aspects of managers' information advantages,managers' representatives' interest proposition and managers' financing decisions.In terms of influencing factors of managers' repurchase timing performance,this paper mainly focuses on two factors :(1)stock liquidity.The price of stocks with good liquidity is less affected by a single transaction and the transaction cost is low,which can increase the repurchase flexibility and reduce the shock cost of the company's stock repurchase,so as to improve the manager's repurchase timing performance.(2)excess yield before stock repurchase.The lower the excess yield before the stock repurchase,the more likely it is to cause the market to overreact to the bad news,resulting in the stock price being undervalued.Therefore,the company's managers will have more opportunities to repurchase the stock at the undervalued price,so the better the manager's repurchase timing performance.This paper takes the share buyback of Chinese a-share listed companies from 2011 to 2018 as the research object,constructs the relative buyback price in multiple comparison Windows,and measures the timing performance of the company's managers in buyback.This paper USES the t test(Wilcoxon non-parametric test)to test the mean(median)of the relative repurchase price.In addition,multiple linear regression is used to analyze how stock liquidity and excess return before stock repurchase affect managers' stock repurchase timing performance.The research conclusions of this paper are as follows :(1)company managers can indeed grasp the timing of stock buyback.(2)stock liquidity has a significant positive impact on managers' performance of repurchase timing.The stronger the stock liquidity is,the better the managers' performance of repurchase timing is,which is consistent with the conclusion reached by scholars in foreign markets.(3)the excess rate of return before stock repurchase has a significant negative influence on the manager's performance of stock repurchase timing.The lower the excess rate of return before stock repurchase,the better the manager's performance of stock repurchase timing is,which is consistent with the conclusion reached by scholars in foreign markets.(4)in the control variables,scholars found that the factors of repurchase motivation and market rate of return that could significantly affect managers' repurchase timing performance in foreign markets had no significant impact on the Chinese market.(5)some company characteristics in the control variables can also have a significant impact on managers' buyback timing performance.Based on the fact that only monthly repurchase related information is available to the outside world,the data used in this study is also monthly data.Looking into the future,the information disclosure of stock repurchase may be more perfect.Supported by more frequent and time-efficient stock repurchase data,it is possible to study the repurchase timing in a shorter period in the future.At the same time,considering that stock repurchase decisions are ultimately made by people--corporate managers,it is a possible research direction to focus on in the future whether the personal characteristics of corporate managers may affect the performance of repurchase timing and how to do so.In addition,for the coefficient and significance of control variables in multiple regression analysis,further analysis and discussion can be conducted in future studies to form a more comprehensive understanding of the influencing factors of buyback timing performance.