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Board of directors and insider trading with share repurchase programs created by Foued Hamouda and Mounira Ben Arab

By: Contributor(s): Material type: TextTextSeries: Journal of management and governance ; Volume , number ,Dordrecht: Springer, 2013Content type:
  • text
Media type:
  • unmediated
Carrier type:
  • volume
ISSN:
  • 13853457
Subject(s): LOC classification:
  • HD31 JOU
Online resources: Abstract: This study examines the relationship between insider trading and board of directors’ characteristics around stock repurchase announcements. It is hypothesized that information disparity between insiders and shareholders from share repurchases announcements creates opportunities for insiders to time their trading. However, there is little evidence on whether board characteristics reduce the probability of insider trading with repurchase announcements. Using data from firms listed on Forbes 500 between 1998 and 2004, we found that insider trading is related to share repurchase announcements. In order to focus on board of directors’ role, we controlled for board characteristics that may change the repurchase decision. Our results provide corroborative evidence of insider net selling around repurchase announcements and the advantages of board characteristics to offset insider trading. In particular, the results suggest that board tenure, directors’ ownership and board directorship change positively insider trading around repurchase announcements. Hence, Securities and Exchange Commission should consider rigorous restrictions on share repurchase announcements and be aware of potential influence of the corporate governance device.
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Holdings
Item type Current library Call number Vol info Copy number Status Notes Date due Barcode
Government Gazette Main Library - Special Collections HD31 JOU (Browse shelf(Opens below)) Vol. 17, no. 2 (pages 405-418) SP21084 Available For in house use

This study examines the relationship between insider trading and board of directors’ characteristics around stock repurchase announcements. It is hypothesized that information disparity between insiders and shareholders from share repurchases announcements creates opportunities for insiders to time their trading. However, there is little evidence on whether board characteristics reduce the probability of insider trading with repurchase announcements. Using data from firms listed on Forbes 500 between 1998 and 2004, we found that insider trading is related to share repurchase announcements. In order to focus on board of directors’ role, we controlled for board characteristics that may change the repurchase decision. Our results provide corroborative evidence of insider net selling around repurchase announcements and the advantages of board characteristics to offset insider trading. In particular, the results suggest that board tenure, directors’ ownership and board directorship change positively insider trading around repurchase announcements. Hence, Securities and Exchange Commission should consider rigorous restrictions on share repurchase announcements and be aware of potential influence of the corporate governance device.

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