• 「Synosia」 Han, S. H., Lee, B. S., & Song, M. (2014). “Frequent Stock Repurchases, False Signaling, and Corporate Governance: Evidence from Korea”. Corporate Governance: An International Review.

    Lab: Synosia

    Professor: Seunghun Han

    Title: Frequent Stock Repurchases, False Signaling, and Corporate Governance: Evidence from Korea

    Authors: Seung Hun Han, Bong-Soo Lee, Minji Song

    Journal: Corporate Governance: An International Review

    Publish: 2014


    Manuscript Type : Empirical

    Research Question/Issue

    We examine the relation between stock repurchases and their potential false signaling of undervaluation using unique Korean data.

    Research Findings/Insights

    We find that the firms that repurchase stocks frequently are less undervalued and have lower post-announcement operating performance than firms that repurchase stocks infrequently. We further find that agency cost and industry-adjusted Tobin’s Q of frequent repurchase firms negatively affect abnormal returns from the repurchase announcement. Corporate governance, especially ownership structure and board independence, affects the probability of frequent signaling.

    Theoretical/Academic Implications

    Our results suggest that the main motivation for frequent stock repurchases is likely to be false signaling, and that corporate governance can mitigate false signaling caused by agency cost.

    Practitioner/Policy Implications

    Frequent stock repurchases are not necessarily motivated by firm undervaluation. Rather, the degree of agency problems and managers’ abuse of information asymmetry tend to increase the frequency of stock repurchases. Therefore, frequent stock repurchases are associated with false signaling by managers; this false signaling can be lowered through better corporate governance. This finding supports the monitoring effect of corporate governance systems.


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