Repurchases, Reputation, and Returns

Abstract

This paper examines whether a firm’s reputation is a determinant of repurchase completion rates (the ratio of actual to announced repurchases) and whether the stock market discounts announcements made by less reputable firms. Prior completion rates are positively correlated with current completion rates and announcement returns, suggesting consistency in repurchases and implying a reputational effect. Further, a nascent literature regarding accelerated share repurchases (ASRs) finds them to be more credible than open market repurchases. I show that the probability of announcing an ASR is greater for firms likely to be concerned about reputation because of low past completion rates.

The market valuation of share repurchases in Europe

“…On the other hand, Bhattacharya and Dittmar (2003) argue that such announcements attract the market's scrutiny and lead to a positive market reaction, because bad firms will not mimic this action to avoid being discovered. Consistent with these arguments, Bonaimé (2012) finds that firms with high prior completion rates are more credible and their announcements lead to higher excess returns.…”

“…Previous studies on the market reaction to share repurchases are predominantly focused on a single country (see, for example, Ikenberry et al (2000) for Canada; Ginglinger and Hamon (2007) for France ;Bessler et al (2009) andHacketal andZdantchouk (2006) for Germany; Oswald and Young (2004) for the UK; and Ikenberry et al (1995), Stephens and Weisbach (1998), Bonaimé (2012) for the US).…”

Share Repurchases and the Flexibility Hypothesis

“…Jagannathan and Stephens () explore the motivations behind multiple repurchase programs and find that the abnormal returns for frequent share repurchase announcements are lower than infrequent announcements, which could be attributed to the investors’ conditioning effect where recurring events receive lower reaction because investors expect it. Conversely, Bonaimé () finds that firm repurchase completion rates matter for future share repurchase completion and announcement returns. These results suggest that investors may have cultivated an expectation that RR firms will continue to announce repurchase programs with predictable frequency and that they will follow through on their announcements with actual repurchases.…”

Faktor-Faktor yang Mempengaruhi Share Repurchase Decisions Pada Perusahaan yang Terdaftar di Bursa Efek Indonesia

“…Acquisitions mempunyai nilai koefisien sebesar 0,00081 dan nilai probabilita sebesar 0,6018 > 0,05 sehingga disimpulkan bahwa acquisition tidak memiliki pengaruh yang signifikan terhadap share repurchase. Hasil ini sejalan dengan penelitian sebelumnya yang tidak menemukan peran acquisition sebagai faktor yang mempengaruhi perusahaan dalam kebijakan share repurchase (Abraham et al, 2018;Yarram, 2014;Cheng et al, 2015); (Bonaime, 2012) Arus kas perusahaan yang timbul dari aktivitas investasi yang berasal dari akuisisi tidak berpengaruh terhadap keputusan pembelian saham yang dilakukan perusahaan.…”