Department of Finance, Feng Chia University, Taiwan
Abstract:
By using a unique dataset of daily institutional trading, we are the first to provide
evidence that the share repurchase announcements (SRAs) reverse institutional
trading behavior: Institutions are net sellers before SRAs and net buyers (or less net
selling) after, especially for domestic mutual funds. We show that SRAs with higher
prior turnover ratio (more visibility) attract more attention from institutions than
events with lower prior turnover ratio. The reversal in institutional trading
surrounding SRAs is non-informational. The higher exposure to the attention bias (the
higher reversal tendency), the worse the post-trade performance the institution earns.
In particular, the evidence shows that the stock price behavior is associated with the
institutional trading behavior around SRAs.
