1Model Development Department, Regions Bank, Birmingham AL, USA
2Department of Economics, Emory University, Atlanta GA, USA
International Journal of Econometrics and Financial Management.
2014,
Vol. 2 No. 3, 102-113
DOI: 10.12691/ijefm-2-3-3
Copyright © 2014 Science and Education PublishingCite this paper: Hao Wang, Xiaochun Liu. The Impact of Investor Heterogeneity in Beliefs on Share Repurchase.
International Journal of Econometrics and Financial Management. 2014; 2(3):102-113. doi: 10.12691/ijefm-2-3-3.
Correspondence to: Xiaochun Liu, Department of Economics, Emory University, Atlanta GA, USA. Email:
xiaochun.liu@emory.eduAbstract
In this paper, we propose a new share repurchasing model to show the impact of the heterogeneity of investor beliefs on share repurchase. We first provide a comprehensive survey on the literature of share repurchases which has not been considered by previous studies, to the best of our knowledge. We review both the theoretical model structures and the major empirical results including various measures of divergence of opinion developed in the literature. Our new repurchasing model uses actual share repurchases to show that investors’ divergence of opinion on the firm value matters in a manager’s share repurchase decision. The long-term stock price performance is consistent with our model predictions.
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