HOW DO DIFFERENT FIRMS PERFORM WHILE TRADING OWN STOCK? A GRANULAR ANALYSIS ON SPECIFIC CHARACTERISTICS AND MARKET CONDITIONS

Abstract

Which firms are more likely to time the market? This paper uses a relative transaction price approach, focusing on 37997 own stock transactions from Euronext Lisbon listed firms, ranging from 2005 to 2015, to estimate the relationship between the market timing ability of firms and a set of firm specific characteristics. Results show that smaller, more efficient but less valuable companies are more likely to be successful to time the market. Furthermore, we show that a shifting event such as a country bailout can lead to an increased performance from firms when trading own stock. Additionally, we find proof that OTC trading can be linked to lower market timing capabilities. At last, and due to the considerable weight of the financial sector within our sample, we estimated isolated results, which prove that the higher the relative performance of a firm when compared to its share value, the higher the capabilities of a financial sector firm to time the market when repurchasing own stock.

Data:
Received: 6 Oct 2020
Revised: 22 Nov 2020
Accepted: 6 Dec 2020
Published: 20 Dec 2020