Acceso usuarios
Jinah Hwang
, Doocheol Moon
This study investigates the value relevance of accounting information based on firms’ actions following share repurchases. Although repurchases are used to distribute excess cash and mitigate agency problems, firms in emerging markets like Korea face an important choice after repurchasing shares, as many retain the repurchased shares for later resale rather than retiring them immediately. Using 11,133 firm-year observations, we find that share retirements significantly enhance the value relevance of accounting information compared to non-retiring firms, whereas resales have a contrasting effect. Specifically, we find that investors pay a premium of 164% to book value and 70% to earnings in retiring firms. Conversely, investors discount by 57% on earnings in reselling firms. These results suggest that investors view accounting information as more credible when firms retire shares and less reliable when firms resell them. Our findings offer important implications for markets that allow managerial discretion in post-repurchase actions.
