Impact of Shareholder Return Policies through Treasury Stocks on Information Asymmetry

This study empirically analyzes the impact of shareholder return policies through treasury stocks, at repurchase, holding, and retirement stages, on the level of information asymmetry between companies and shareholders. We measure the information asymmetry level using spreads between best ask and best bid. Our results show that the initial stage of repurchasing treasury stocks does not significantly affect the information asymmetry level between companies and shareholders. However, holding treasury stocks increases information asymmetry, while retiring them decreases it. These results indicate that the uncertainty of holding treasury stocks exacerbates information asymmetry, while the conclusiveness of retiring them alleviates it. Our study contributes to the existing literature by analyzing the impact of treasury stock-related activities as part of shareholder return policies affect information asymmetry between companies and shareholders. It offers a new perspective on shareholder return policy research and provides practical implications for corporate managers, investors, and policymakers.