Question

Apple Incorporated (AI) board of directors has indicated   that they will repurchase AI’s stock effective July 1st 2020. You currently hold 100 AI’s stock. Explain in detail, the concept of “information content” to be derived from the board of director’s pronouncement. Discuss the likely impact of this pronouncement to AI’s stock price? In respect of this announcement, discuss the concept of the “signaling theory” and how will managers of AI be placed in an advantageous position ahead of the normal investor? (Word count limit (250-500) Apple Incorporated (AI) board of directors has indicated   that they will repurchase AI’s stock effective July 1st 2020. You currently hold 100 AI’s stock. Explain in detail, the concept of “information content” to be derived from the board of director’s pronouncement. Discuss the likely impact of this pronouncement to AI’s stock price? In respect of this announcement, discuss the concept of the “signaling theory” and how will managers of AI be placed in an advantageous position ahead of the normal investor? (Word count limit (250-500)

Answer 1

Answer:

For this situation when board of directors has shown that they will buy the stock then there would be appropriate data disclosure with respect to the organization to the investors and the investor/shareholder ought to be profoundly rational so as to take different decisions so that there ought not be a data asymmetry existing between the administration and the investors.

Investors ought to be wary or skeptical about their stock that they would get repurchased and after the declaration of the governing body the shares are going to increaset since this is a positive advancement with respect to the organization and the shares cost will be expanding in light of the fact that the general market top of the organization will be expanding with this share repurchase.

the idea of signalling theory will be representing that the sound or rational investor will consistently be satisfying his responsibility due to risk of monetary misfortune and punishments or penalties if there should arise an occurrence of non fulfillment of the duties so investors will expect that the dedication will be satisfied and directors will have a favorable circumstances or advantageous position since they are the ones who are taking the decisions and they would have insider data as well.there is an away from of data or information asymmetry which will be existing between the managers and the investors of the organization since managers are known to the decisions which have been made by the organization with respect to this share repurchase.