Network Centrality and Managerial Market Timing Ability

95 Pages Posted: 12 Sep 2020

See all articles by Theodoros Evgeniou

Theodoros Evgeniou

INSEAD

Joel Peress

INSEAD - Finance

Theo Vermaelen

INSEAD - Finance; European Corporate Governance Institute (ECGI)

Ling YUE

affiliation not provided to SSRN

Date Written: September 2020

Abstract

We document that long-run excess returns following announcements of share buyback authorizations and insider purchases are a U-shape function of firm centrality in the input-output trade flow network. These results conform to a model of investors endowed with a large but finite capacity for analyzing firms. Additional links weaken insiders' informational advantage in peripheral firms (simple firms whose cash flows depend on few economic links) provided investors' capacity is large enough, but eventually amplify that advantage in central firms (firms with many links) due to investors' limited capacity. These findings shed light on the sources of managerial market timing ability.

Keywords: Buybacks, insider trading, Market Efficiency, market timing, Network centrality

JEL Classification: G32, O32

Suggested Citation

Evgeniou, Theodoros and Peress, Joel and Vermaelen, Theo and YUE, Ling, Network Centrality and Managerial Market Timing Ability (September 2020). CEPR Discussion Paper No. DP15240, Available at SSRN: https://ssrn.com/abstract=3688194

Theodoros Evgeniou (Contact Author)

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France

Joel Peress

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 60 72 40 00 (Phone)
+33 1 60 72 40 45 (Fax)

Theo Vermaelen

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
33 1 60 72 42 63 (Phone)
33 1 60 72 40 45 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Ling YUE

affiliation not provided to SSRN

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