Open-Market Repurchases, Firm Quality, And Discouraging Short Sellers

Announcing an open-market repurchase (OMR) is presented as a potential tool for managers to discourage short selling in their firm’s stock.  Empirical testing determines the relation that abnormal short selling that follows an OMR announcement has with abnormal returns during the announcement period...

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Bibliographic Details
Published in:Journal of business & economics research (Littleton, Colo.) Colo.), 2016-10, Vol.14 (4), p.119-126
Main Author: Spurlin, W. Paul
Format: Article
Language:English
Subjects:
Abnormal returns
Current liabilities
Economic models
Economic statistics
Economic theory
Investments
NASDAQ trading
Open market operations
Return on investment
Sales
Securities analysis
Securities buybacks
Short sales
Stocks
Studies
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Summary:Announcing an open-market repurchase (OMR) is presented as a potential tool for managers to discourage short selling in their firm’s stock.  Empirical testing determines the relation that abnormal short selling that follows an OMR announcement has with abnormal returns during the announcement period and announcing firm quality. Results show that post-announcement abnormal short sales decrease with positive abnormal returns during the OMR announcement period but that announcing firm quality is unrelated to the level of post-announcement abnormal short sales. Therefore, announcing an OMR may be an effective tool to discourage short sales in a firm’s stock independent of firm quality because abnormal returns around an OMR announcement tend to be positive and short sellers do not appear to distinguish among announcing firms based on firm quality. 
ISSN:1542-4448
2157-8893
DOI:10.19030/jber.v14i4.9800