How useful are signals? A micro-structure analysis |
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| Authors: | Michele O’Neill Judith Swisher |
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| Institution: | (1) College of Business and Economics, University of Idaho, USA;(2) Haworth College of Business, Western Michigan University, USA |
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| Abstract: | We analyze how the market processes a signaling event by studying a sample of self-tender offers, events often viewed as signals
of firm value. By examining changes in the degree of informed trading, we find asymmetric information costs fall at announcement,
remain low throughout the event, and increase at offer expiration. By one month following expiration, informed trading returns
to a level not significantly different from that prior to the offer. Higher risk firms have significantly larger declines
in information asymmetry during the offer. Increases in information asymmetry persist one month following expiration for firms
with lower pre-offer informed trading. (JEL G14, G32) |
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