The effect of managerial overconfidence on the market timing ability and post-buyback performance of open market repurchases

•Share repurchase is discretionary and flexible and managers own the discretions.•Managerial overconfidence hurts the timing and post-buyback performance of OMRs.•The post-buyback return is lower particularly when the repurchase cost is higher.•Corporate governance mitigates the adverse effect of overconfidence on OMRs.

This paper investigates whether managerial overconfidence has an adverse impact on the market timing ability and post-buyback performance of open market repurchases, and whether corporate governance can mitigate the adverse impact in Taiwan. We find that managerial overconfidence raises the repurchase cost implying an adverse impact on the market timing ability of share repurchases. The repurchasing firms with overconfident managers experience poorer short-run announcement return and long-run stock performance than those without overconfident managers because of the poorer market timing ability and the higher repurchase cost. However, corporate governance mitigates the adverse impacts of managerial overconfidence on the market timing ability and post-buyback performance of repurchases.