Signal strength adjustment behavior: Evidence from share repurchases
研究公司宣布公开市场回购时，如何通过调整回购计划规模或期限来增强信号可信度，以应对同时发布的坏消息，并发现市场对此调整有正面反应。
This paper extends the signaling hypothesis by investigating the signal strength adjustment behavior with respect to the announcement of an open market repurchase (OMR). Given that an OMR is a non-binding commitment for the repurchasing firm, the stock market would likely scrutinize the credibility of the undervaluation signal from the OMR announcement of the firm. This may compel the manager to engage in various mechanisms in order to strengthen the undervaluation signal of the OMR announcement. This paper investigates whether managers of repurchasing firms would modify the terms of the OMR program when the simultaneous announcements of bad news threaten the credibility of the signal from the OMR announcements. Consistent with our signal strength adjustment hypothesis, we find that managers of repurchasing firms increase (shorten) the repurchase plan size (period) with the magnitude of bad news in the simultaneous announcements. Our results also show that the stock market reacts positively to the signal strength adjustments, indicating that they are informative to the market. These results hold after using various techniques to control for sample selection bias.