Signaling and Information Asymmetry in the Context of Voluntary Disclosure, Share Repurchases, and Capital Structure Decision-Making

Essay 1 examines a positive relationship between disclosure through Tweets and institutional ownership, especially after the maximum number of characters per Tweet is doubled. Additionally, changes in institutional ownership are more pronounced for higher levels of Twitter disclosure, confirming that investors are more sensitive to disclosure changes in more transparent information environments. As managers tend to avoid disclosure of negative news through fast-paced Twitter but make use of Twitterâ??s dynamic nature to disseminate positive news quickly, the effect on institutional ownership is more pronounced for positive Tweets, contrary to other disclosure channels. For high (low) increases (decreases) of Twitter disclosure, a change in Twitter disclosure is associated with a stronger reaction of institutional ownership.Essay 2 examines how highly-sophisticated investors perceive incomplete share repurchase programs. Estimating the trading activity of highly-sophisticated algorithmic traders as a latent variable in a linear equation system, the results show that investors appear to avoid incomplete share repurchase programs. Incomplete share repurchase programs are thus interpreted as negative signals. Subsample analyses reveal that share repurchase programs are not completed due to insufficient cash flow, as a result of financial difficulties. Essay 3 targets executives as the actual decision-makers for interviews to examine the impact factors on capital structure decisions. The interview statements confirm the explanatory power of tradeoff theory, pecking order theory, and market timing theory, and show that tradeoff and pecking order theory, as well as tradeoff and market timing theory are compliments in explaining capital structure. Firm and personal characteristics are also stated as major impact factors on capital structure decisions. The essay generates new insights in finding that job security and executive compensation are major influences on capital structure decisions