Information content of repurchase signals: Tangible or intangible information?

The outperformance of repurchasing firms with a high book-to-market (B/. M) ratio is usually explained by investors' undervaluation of the firm's past performance. However, several studies suggest that the underestimation of future intangible value may explain the high return associated with the share repurchase. To better understand the actual information content of repurchases, I decompose the B/. M ratio into past tangible information and future intangible information and find that repurchase signals an undervaluation of the intangible return. In addition, I investigate several potential proxies for intangible information-R&D expenses, intangible assets, and future operating performance. My results show that intangible information signals the undervaluation of future operating performance.