2019 Fiscal Year Research-status Report
Does Reputation Matter? Evidence from Share Repurchases
| Project/Area Number |
19K13866
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| Research Institution | Waseda University |
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Principal Investigator |
ラオ デービッド 早稲田大学, 商学学術院(経営管理研究科), 准教授(任期付) (70835214)
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| Project Period (FY) |
2019-04-01 – 2022-03-31
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| Keywords | Corporate Finance / Share Repurchases / Voluntary Disclosures / Accounting / Finance |
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| Outline of Annual Research Achievements |
I have undertaken several significant research projects using the KAKEN research grant. I have published my paper, "Does reputation matter? Evidence from share repurchases", in a top Finance journal, Journal of Corporate Finance. In this study, I examine whether the stock market considers the firm's reputation established through a history of management earnings forecasting when it evaluates open market repurchase announcements in the Japanese context. We find that while the stock market considers the firm's repurchase reputation (as proxied by prior repurchase completion rates), it also considers the firm's forecast reputation (as proxied by prior management earnings forecast accuracy). Moreover, we find that the stock market reacts more strongly to the firm's forecast reputation when its repurchase reputation is low. Additional analyses suggest that when a firm announces a share repurchase program for the first time (i.e., when there is no repurchase reputation), investors turn to the forecast reputation within the firm as an alternative source of reputation, on which the credibility of repurchase announcements is assessed. The implication of our study is that firms establish a reputation in the market through multiple sources of announcements.
Based on this study as well as other well-known studies that have been conducted on share repurchases, I have commenced a research project to examine whether managers of repurchasing firms have the incentive to strengthen the signal of OMRs when simultaneous announcements of bad news undermine the credibility of OMR signal.
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| Current Status of Research Progress |
Current Status of Research Progress
1: Research has progressed more than it was originally planned.
Reason
The paper - "Does reputation matter? Evidence from share repurchases" has been successfully published in Journal of Corporate Finance. This research project has progressed more smoothly than initially planned.
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| Strategy for Future Research Activity |
I am undertaking a research project that examine managerial signal strength adjustment behavior with respect to open market share repurchase announcements. We plan to submit this study in a top Finance journal as well as presenting this study in several international seminars and conferences.
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| Causes of Carryover |
For the next fiscal year (2020), I plan to incur amount of the research grant on mainly research equipment (e.g., computers), research data, and traveling expenses for attending conferences and seminars.
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