آیا مدیران بازار را زمان بندی می کنند؟ شواهدی از خرید مجدد سهم بازار باز
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|14108||2007||22 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Banking & Finance, Volume 31, Issue 9, September 2007, Pages 2673–2694
A contentious debate exists over whether executives possess market timing skills when announcing certain corporate transactions. Pseudo-market timing, however, has recently emerged as an important alternative hypothesis as to why the appearance of timing might be evident when, in fact, none exists. We reconsider this debate in the context of share repurchases. Consistent with prior studies, we also report evidence of abnormal stock performance following buyback announcements. Pseudo-market timing, however, does not appear to be a viable explanation. Our results are more consistent with the notion that managers possess timing ability, at least in the context of share repurchases.
One of the more contentious ideas in the finance literature is the extent to which corporate managers have the ability to time the market when executing important corporate transactions. Following the seminal study of Ritter (1991), many papers such as Loughran and Ritter (1995) report poor long-run stock performance after firms issue equity. These studies conclude that managers seem to time the stock market by taking advantage of “windows of opportunity” and issuing mis-priced equity to investors with overly optimistic expectations. Purnanandam and Swaminathan (2004) support this view by documenting that IPO firms have price multiples that are high relative to their industry peers. This apparent timing ability is not restricted to pure equity issues. In an issuance-like transaction, Loughran and Vijh (1997) show that acquiring firms earn negative long-run abnormal returns if the deal is financed with new stock. Rau and Vermaelen (1998) show that this negative drift is accentuated in growth firms who issue equity to finance a takeover. Conversely, Ikenberry et al., 1995 and Ikenberry et al., 2000 find that firms which announce their intention to engage in the opposite transaction by initiating a share repurchase program tend to experience positive long-run abnormal stock performance. Studies regarding other corporate decisions, such as stock splits (e.g., Ikenberry and Ramnath, 2002) and debt offerings (e.g., Spiess and Affleck-Graves, 1999) report long-term abnormal return patterns that are seemingly indicative of managerial timing ability. This idea of managerial timing is not inconsistent with statements we see in the popular press when companies increase or shrink their equity base.1 Surveys of managers also support this view of timing. Graham and Harvey (2001) show that two-thirds of the CFOs they surveyed admit that the extent to which their stock is mis-priced is an important factor in issuing equity. In another widely cited survey of high-level executives, Brav et al. (2005) report that over 80% of corporations initiate stock repurchase programs when their stock is “a good value relative to other investments.” In short, managers directly and indirectly indicate an ability to identify mis-pricing. Many executives, when announcing corporate financing decisions, seem to predicate many of their actions on this capability. Yet this view of the “informed manager” is not universal. A growing literature challenges the empirical evidence on managerial timing by raising important questions that generally fall into one of two key categories. The first relates to empirical estimation issues or problems. These include concerns over appropriate benchmarks and how to measure abnormal performance and its significance. For example, Fama, 1998 and Eckbo et al., 2000 argue that the results in some empirical studies which focus on long-horizon returns may not be robust due to the use of incorrect or flawed methodologies.2 Papers by Brav and Gompers, 1997, Brav et al., 2000 and Mitchell and Stafford, 2000 all support this view that long-run returns are sensitive to the choice of benchmark and/or the method used to measure abnormal performance.3Gompers and Lerner (2003) point out that some results are time-period sensitive; they conclude that IPO performance is not abnormal in the pre-NASDAQ era of 1935–1972 when a calendar-time estimation procedure is used. Barber and Lyon (1997) summarize the potential problems with conventional test statistics in long-term performance studies as well. In sum, these papers raise question as to the underlying quality and reliability of long-horizon evidence. While these studies, when considered collectively, may provide a robust body of evidence, this controversy can never be fully resolved. However more recently, a second very important argument that has little to do with poor measurement problems has emerged. This hypothesis challenges, in a fundamental way, the basic notion of managerial timing. Schultz (2003) in a widely circulated paper develops the hypothesis of “pseudo-market timing.” He argues that to the extent that managers condition important corporate decisions, such as equity issuance, on past stock market performance, researchers will observe abnormal stock performance when event-time methods are used, even when, ex-ante, there is no mis-pricing. This initial work by Schultz has spawned several new papers. Supporting the importance of pseudo-market timing, Butler et al. (2005) argue that the close link between the portion of equity in new securities issues and future market returns is due to pseudo-market timing. This contrasts directly, though, with a recent paper by Baker et al. (2006). They present evidence that pseudo-market timing explains only a small portion of managerial decisions including equity issuance decisions. Similarly, papers by Viswanathan and Wei, 2004 and Dahlquist and De Jong, 2005 question the extent to which pseudo-market timing can explain the equity-issuance puzzle. The notion of managerial timing is contentious. The introduction of pseudo-market timing as an innocent explanation offers a compelling alternative to carefully consider. Yet studies of the pseudo-market timing hypothesis have generally been limited to equity issuances, the context for which Schultz first envisioned this hypothesis. As such, we consider a timing scenario for a transaction which is the opposite of equity issuance, specifically, open market share repurchases. A rich literature suggests that mis-pricing is a key reason for buybacks and that managers often predicate their decision to repurchase stock on the extent to which they perceive the stock as undervalued.4 This environment seemingly provides a fresh setting to examine this important question of pseudo-market timing. We begin by considering the key implications of pseudo-market timing in the context of buybacks. We first evaluate the extent that observed patterns in announcement behavior are dependent on past market performance. We then follow this by evaluating a clear implication of pseudo-timing: event-time return analysis techniques compared to calendar-time techniques should produce very different results. To the extent that any post-announcement abnormal performance is observed, a critical distinguishing inference of pseudo-market timing is that subsequent long-run abnormal returns should be observed only in event-time methods, but not in calendar-time. Finally, we evaluate actual buyback activity as a separate lens with which to identify managerial timing ability. If managers are indeed endowed with an information advantage, their actual buyback activity should be consistent with the mis-pricing they perceive. We form a comprehensive sample of 5508 US repurchase announcements from 1980 to 1996. Inconsistent with a key premise of pseudo-market timing, we do not observe a significant dependency on past market performance in the way in which buybacks are announced. Specifically, while there is a relative decline in the prevalence of buybacks after bullish periods of time, there is little evidence that as market performance falls, particularly after it has fallen substantially, there is any noticeable change in the propensity to buy back shares. 5 As in previous studies we find robust and significant evidence of long-term stock return drifts after share repurchase announcements in the event-time. Moreover, when we evaluate the evidence using calendar-time techniques, we still observe positive abnormal returns following buyback program announcements. Further, the point estimates here differ only modestly from what is observed in an event-time setting. Collectively, these results stand in contrast with the pseudo-market timing hypothesis and suggest that managers do have some timing ability. If we look deeper and consider actual buyback trading activity, the results are also consistent with the idea that managers, on average, are informed. When companies are more aggressive in buying back stock, abnormal performance grows substantially. Conversely, when no shares are repurchased, long horizon performance is lower than otherwise. This pattern is accentuated in value firms where one might expect that mis-pricing is more likely to be motivating the repurchase transaction. In sum, we consider the robustness of the post-announcement buyback drift and the extent to which pseudo-market timing is, perhaps, an innocent explanation to what is an increasingly common corporate event. Pseudo-market timing seems to explain, at best, only a small portion of long-term abnormal performance after buyback announcements. Instead, the evidence is more consistent with managerial timing ability, at least with respect to share buybacks. The remainder of the paper is organized as follows. Section 2 describes the data and the methods used in the paper. Section 3 examines the pseudo-market timing hypothesis. Section 4 describes the empirical results and Section 5 provides interpretations of the results and some concluding remarks.
نتیجه گیری انگلیسی
A controversial literature has developed as to whether managers initiate certain corpo- rate actions to take advantage of windows of mis-pricing and, further, whether the stock market is slow to adapt to this information. The list of transactions is long and includes, for example, dividend initiations, exchange listings, stock splits and mergers. Recently, pseudo-market timing has been suggested as an innocent explanation as to why researchers might draw the conclusion of market timing ability when, in fact, none might exist. Such a situation casts a completely different light on an otherwise rich litera- ture which finds economically material and statistically significant long-horizon return drifts. We offer an extensive examination of the long-horizon evidence following share repur- chase announcements and revisit this idea as to whether managers are knowingly aware of mis-pricing and are able to time the market. Further, we estimate the extent to which pseudo-market timing explains at least some portion of the long-run return performance of buyback firms using a sample of 5508 programs announced by US firms between 1980 and 1996.Pseudo-market timing is predicated on a dependency in announcement behavior with past market performance. We check this key underlying characteristic and find the evi- dence weak. While there are fewer repurchases announced following bull markets, we do not find pervasive evidence of buyback announcements following bearish markets. This result is inconsistent with a critical premise of the pseudo-market timing story. We also compare calendar- and event-time methods to estimate long-horizon abnormal return performance. If pseudo-market timing is driving the abnormal performance we observe as researchers by using an event-time method, such performance will not occur once we control for any dependency in announcements. Yet using a calendar-time approach, we still observe significant outperformance; changes in the alpha point estimates between calendar- and event-time methods suggest that pseudo-market timing can explain, at best, only a small portion of the buyback return drift. When we examine manager behavior using actual buyback activity, the evidence is seemingly consistent with managers possessing some timing ability. In sum, the evidence presented here does not support pseudo-market timing as a viable explanation for the positive long-term abnormal stock return drift observed, on average, in buyback firms; instead, the evidence is more consist with the notion that managers pos- sess market timing abilities when announcing and executing buyback decisions.