Abstract
Bond repurchases are widespread in the US and other markets but data limitations have thus far prevented market-timing analysis. Using unique Israeli daily data we show that firms time the market in their actual open market bond repurchases. Bond repurchases typically follow price decline and result in significantly positive abnormal returns in the following days: about 1 % in five trading days. The market reaction is quicker within a pre-announced repurchase program, and it is stronger when the firm repurchases high-yield bonds or when the repurchase is preceded by positive net insider share purchases. The results lend support to the information motive for bond repurchases benefiting ongoing stakeholders but detrimental to selling bondholders.
| Original language | English |
|---|---|
| Article number | 107094 |
| Journal | Journal of Banking and Finance |
| Volume | 161 |
| DOIs | |
| State | Published - Apr 2024 |
| Externally published | Yes |
Bibliographical note
Publisher Copyright:© 2024 Elsevier B.V.
Funding
We are grateful to an anonymous referee, Edith Hotchkiss (the editor), Azi Ben-Rephael, Laura Casares Field, Sivan Frenkel, Dan Galai, Koresh Galil, Evgeny Lyandres, Daniel Nathan, Jacob Oded, Yehuda Porath, Nimrod Segev, Ron Shalev, Yishay Yafeh, Amir Yaron, seminar participants at the Bank of Israel, Bar-Ilan University and Tel Aviv University, and the FMA annual meeting Doctoral Student Consortium 2018 (San Diego) participants for helpful comments and suggestions. Irit Harel and Yulia Nudelman were of much help with the data. Wohl thanks the Henry Crown Institute of Business Research in Israel, the Jeremy Coller Foundation, and the Goldrich Chair in International Banking for their financial support. We are grateful to an anonymous referee, Edith Hotchkiss (the editor), Azi Ben-Rephael, Laura Casares Field, Sivan Frenkel, Dan Galai, Koresh Galil, Evgeny Lyandres, Daniel Nathan, Jacob Oded, Yehuda Porath, Nimrod Segev, Ron Shalev, Yishay Yafeh, Amir Yaron, seminar participants at the Bank of Israel, Bar-Ilan University and Tel Aviv University, and the FMA annual meeting Doctoral Student Consortium 2018 (San Diego) participants for helpful comments and suggestions. Irit Harel and Yulia Nudelman were of much help with the data. Wohl thanks the Henry Crown Institute of Business Research in Israel, the Jeremy Coller Foundation, and the Goldrich Chair in International Banking for their financial support.
| Funders | Funder number |
|---|---|
| Bank of Israel | |
| Henry Crown Institute of Business Research in Israel | |
| Bar-Ilan University | |
| Tel Aviv University | |
| Jeremy Coller Foundation |
Keywords
- Bond buybacks
- Bond repurchases
- Repurchase