No. of Recommendations: 15
" On average, in the days before a buyback announcement, executives trade in relatively small amounts'less than $100,000 worth. But during the eight days following a buyback announcement, executives on average sell more than $500,000 worth of stock each day'a fivefold increase. Thus, executives personally capture the benefit of the short-term stock-price pop created by the buyback announcement."
This is certainly bad behaviour.
But trading on material non-public information is already quite illegal in the US*, so there isn't really any need for a new rule or tax or prohibition.
A point that is often not emphasized enough: note the last word of the quote.
Buybacks don't on average raise the value of a share, so they don't on average change the price other than momentarily.
(assuming that the average buyback isn't done below intrinsic value, which the research supports)
But buyback ANNOUNCEMENTS move the price. In this case, perceptions are more important that the reality.
Jim
* Unless you're elected to congress, of course.
