Why Do Firms Announce Open-Market Repurchase Programs?

Oded, Jacob

doi:10.1093/rfs/hhh004

Cited by 87 publications

(30 citation statements)

References 31 publications

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“…Consequently, the larger the ASR portion of a repurchase program, the less flexibility the firm retains to significantly alter the program in response to subsequent changes in the price and liquidity of its stock, unexpected shocks to cash flow and/or investment, etc. 6 In other words, the choice to undertake an ASR in a repurchase program represents a substantial partial exercise of the ''flexibility option'' inherent in a repurchase program that would otherwise be comprised entirely of OMRs, e.g., see Ikenberry and Vermaelen (1996) and Oded (2005).…”

Section: Introductionmentioning

confidence: 99%

Accelerated share repurchases

Bargeron

Kulchania

Thomas

2011

Journal of Financial Economics

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Accelerated share repurchases (ASRs) are credible commitments by firms to repurchase shares immediately. Including an ASR in a repurchase program reduces the flexibility that firms have to alter an announced program in response to subsequent changes in the price and liquidity of its shares, unexpected shocks to cash flow and/or investment, etc. Thus, we investigate whether firms' decisions to include ASRs in their repurchase programs are associated with factors expected to influence the costs of lost flexibility and the benefits of enhanced credibility and immediacy. We find robust evidence consistent with the costs of lost flexibility and the benefits of credibility and immediacy being important determinants of ASR adoption. Additionally, we find that ASR announcements are associated with positive average abnormal stock returns.

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Section: Introductionmentioning

confidence: 99%

Accelerated share repurchases

Bargeron

Kulchania

Thomas

2011

Journal of Financial Economics

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“…Ikenberry and Vermaelen (1996) suggested that a repurchase program is an option that gives a firm the ability to swap its market value for its true intrinsic value if the future market prices are lower than the true intrinsic value. Thus, a firm grants itself an option through announcing a share repurchase program, and the positive value of this option can be reflected in the abnormal returns accruing from the announcement (Oded, 2005).…”

Section: Related Literature and Hypotheses Developmentmentioning

confidence: 99%

Determinants of share returns following repurchase announcements in China

Gan

Bian²,

et al. 2017

Investment Management and Financial Innovations

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By combining the market model with the three-factor model, this study investigates fir ms' share returns after the announcement of share repurchase. Employing data for Chi na's A-share market, this study's sample utilizes 417 share repurchase announcements over the pe riod of 2000 to 2012. Empirical results show that firms with higher sales gro wth rates are more likely to send a positive signal to the market through their share repur chase efforts. Analysis also shows that the higher a firm's price-to-earnings ratio (utilized as a measure of overvaluation), the lower the firm's cumulative abnormal returns. These results imply that Chinese share markets put more emphasis on the firm's future growth and share overvaluation.

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“…In other words, the credibility and reputation established through the fulfillment of past commitments may play a crucial role in the evaluation of the informational content of a share repurchase announcement. For example, Oded (2005) speculates "reputation effects can provide an alternative explanation for the announcement return without a commitment to repurchase." However, Oded does not examine this issue empirically.…”

Section: Dollar Amount (In Millions)mentioning

confidence: 99%