Actual Share Repurchases, Price Efficiency, and the Information Content of Stock Prices

Busch, Pascal; Obernberger, Stefan

doi:10.1093/rfs/hhw071

Cited by 57 publications

(20 citation statements)

References 44 publications

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“…More recently, Hillert et al (2016), using a new comprehensive data set of realized share repurchases in the US, show that repurchases unequivocally improve liquidity and suggest that endogenous controls have confounded results in earlier studies. Busch and Obernberger (2017) find that share repurchases make prices more efficient and reduce idiosyncratic risk, and that the effects are more pronounced during market downturn.…”

Section: Literature Reviewmentioning

confidence: 86%

Stock Market Liquidity: Financially Constrained Firms and Share Repurchase

Nguyen

2017

AFR

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Stock liquidity lowers the cost of share ownership to outside investors and decreases firms' cost of capital. This study substantiates that shares of financially constrained firms are significantly less liquid than shares of similar but financially unconstrained firms. Acting as buyers of last resort for their own shares, share repurchases by financially constrained firms enhance stock liquidity, which alleviates the cost of external financing and underinvestment. Increased stock liquidity improves information efficiency, inducing higher added value from incremental capital investments. Further, higher stock liquidity lowers stock volatility and allows financially constrained firms to issue equity.

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Section: Literature Reviewmentioning

confidence: 86%

Stock Market Liquidity: Financially Constrained Firms and Share Repurchase

Nguyen

2017

AFR

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“…The market reaction to share repurchase announcements means that investors are convinced that the stock markets are effi cient and the share repurchase programmes convey important information. The market reaction proves that share repurchase announcement enhance stock market effi ciency (Busch & Obernberger, 2017).…”

Section: Literature Reviewmentioning

confidence: 95%

“…Most of the research, inter alia Asquith and Mullins (1986), Comment and Jarrell, (1991), Ikenberry et al (1995), McNally (1999, Kahle (2002), Hackethal and Zdantchouk (2006), Wang and Johnson (2008), Rau and Vermaelen (2002), Będowska-Sójka (2003), Gryglewicz (2004), Gurgul and Majdosz (2005), and Pieloch (2011), demonstrates that the announcement of a share repurchase could be a strong signal to the capital market, and could trigger a statistically signifi cant increase in the market prices of the shares.…”

Section: Literature Reviewmentioning

confidence: 99%

The information content of share repurchases – evidence from Poland

Wrońska-Bukalska¹,

Kaźmierska-Jóźwiak²,

Rozkovec³

2018

E+M

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“…If firms are genuine using share repurchase to signal information, it would promote greater reflection toward information in price. Recent empirical researches find that share repurchase enhance the accuracy of the stock price by providing price support at fundamental values (Busch & Obernberger, 2017;Dittmar & Field, 2015;Liu & Swanson, 2016;Stephens & Weisbach, 1998).…”

Section: Impact Of Firm Share Repurchases Intensity On Stock Price Efficiencymentioning

confidence: 99%

“…Some studies suspect that share repurchases might be used for the same purpose (Babenko, 2009;Bonaime & Ryngaert, 2013;Fenn & Liang, 2001). Opposing to the market perception and the past researches, some scholars documented that share repurchases will improve the speed of incorporating new positive information into the stock price (Busch & Obernberger, 2017;Hou & Moskowitz, 2005) andimprove the accuracy of the stock price by providing price support at fundamental values (Brav, Graham, Harvey, & Michaely, 2005;Busch & Obernberger, 2017;Dittmar, 2000). However, there is relative less empirical evidence to prove price efficiency caused by firm stock repurchase.…”

Section: Introductionmentioning

confidence: 99%

Do Share Repurchases Promote Efficient Stock Price?

et.al¹

2021

TURCOMAT

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Purpose: This paper examines whether a greater firm’s repurchase intensity translates into more efficient stock price. Design/ Methodology/ Approach: An unbalanced panel data, that consists of a sample of 337 US repurchasing firms between 2012 and 2016, was analyzed. Based on the result of the Hausman test, fixed effects estimator was employed to estimate the coefficients. To address heterogeneity across time and firms, time effect and standard error clustered by firms were applied. Findings:Agreater firms’ share buyback intensity stimulates faster incorporation of information in price and results more efficient stock prices. The main findings were further confirmed with robustness test and supports the notion that share repurchase serves as signalling tool and price support to promote more efficient stock price. Practical implication: The finding has implication on how share repurchase can be used in three ways: to ease panic selling and deep selling pressure during the downtime; enhance informed trading in which is a result of information signalled by managerial share repurchases; and attract investors’ attention on neglected and undervalued stock. Originality/value: This research provides new insight and empirical evidenceto reject public cynicism about share repurchases used by firms to manipulate their share prices.

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Actual Share Repurchases, Price Efficiency, and the Information Content of Stock Prices

Cited by 57 publications

References 44 publications

Stock Market Liquidity: Financially Constrained Firms and Share Repurchase

Stock Market Liquidity: Financially Constrained Firms and Share Repurchase

The information content of share repurchases – evidence from Poland

Do Share Repurchases Promote Efficient Stock Price?

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