Investor sentiment, trading activity and effect of the open-market share repurchase based on firm characteristics

ABSTRACT This study realises that before and after disclosure of repurchase information of share repurchasing firms, there are significant differences in investor sentiment towards the repurchasing stock. With repurchase information, repurchasing firms attempt to reduce negative investor sentiment towards the firms, thereby supporting the sentiment change motivation hypothesis. In addition, this study demonstrates that relationship between investor sentiment and stock returns differs according to investor groups. Margin trading investors, in particular, have irrational investor sentiment on share repurchase events. Finally, firm characteristics that support share repurchase influence the relationship between investor sentiment and cumulative abnormal returns in the study period.