Not All Buybacks are Created Equal: The Case of Accelerated Stock Repurchases

Michel, Allen; Oded, Jacob; Shaked, Israel

doi:10.2139/ssrn.1357556

Cited by 9 publications

(14 citation statements)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Consistent with Michel et al. (), we observe that our sample of 135 ASRs consists of 56 pure ASRs (where only an ASR is announced) and 79 mixed ASRs (where another repurchase announcement occurs around the ASR, suggesting that the ASR may be part of a larger program). On a univariate level, pure and mixed ASR firms do not exhibit any statistically significant differences in attributes.…”

Section: Data and Samplesupporting

confidence: 90%

“…In contrast, Michel et al. () did not support the undervaluation hypothesis as they reported poor post‐announcement stock performance by these firms. Marquardt et al.…”

Section: Related Literaturementioning

confidence: 87%

“…Analysis also suggests that in the post‐repurchase period ASR firms underperform relative to OMR firms, which may provide an explanation for poor long‐term price performance for ASRs as documented in Michel et al. (). It must be noted that both ASR and OMR firms exhibit superior industry‐adjusted operating performance prior to the repurchase announcement and that this pattern continues after the announcement.…”

mentioning

confidence: 78%

“…However, by delegating the repurchase to an investment bank, an ASR firm may become less susceptible to lawsuits (Michel et al. ).…”

mentioning

confidence: 99%

See 3 more Smart Citations

The Causes and Consequences of Accelerated Stock Repurchases

2014

View full text Add to dashboard Cite

We examine the choice between accelerated share repurchase (ASR) and open market repurchase (OMR) as repurchase mechanisms between 2004 and 2007. For a sample of ASRs and OMRs that actually buy shares in the announcement quarter, we find that ASR firms have lower market-to-book ratios, less cash, but greater managerial entrenchment. Prior to repurchase, ASR firms are subject to significantly more takeover rumors than OMR firms are, and this, along with entrenchment and undervaluation, affects the choice to use ASRs. ASR firms experience positive average abnormal returns both before and after the announcement. Moreover, the latent takeover probability is significantly lower for both ASR and OMR firms (when compared with pre-announcement levels), but the reduction for ASR firms is more pronounced. Our results suggest that repurchases, and especially ASRs, indeed make a firm a less attractive prospect for takeover.

show abstract

Section: Data and Samplesupporting

confidence: 90%

“…In contrast, Michel et al. () did not support the undervaluation hypothesis as they reported poor post‐announcement stock performance by these firms. Marquardt et al.…”

Section: Related Literaturementioning

confidence: 87%

mentioning

confidence: 78%

“…However, by delegating the repurchase to an investment bank, an ASR firm may become less susceptible to lawsuits (Michel et al. ).…”

mentioning

confidence: 99%

See 2 more Smart Citations

The Causes and Consequences of Accelerated Stock Repurchases

2014

View full text Add to dashboard Cite

show abstract

“…Thus, the differences in results and conclusions across the two papers are largely attributable to several important variables omitted by Chemmanur, Cheng, and Zhang as well as fundamental differences in sample construction. Michel, Oded, and Shaked (2010) report positive average announcement period abnormal returns and negative post-announcement drift for ASR firms. Michel et al interpret this pattern of returns as indicating that the information content of ASRs is negative but the market does not recognize the full extent of the ''negative news'' at announcement.…”

Section: Introductionmentioning

confidence: 92%

Accelerated Share Repurchases

2010

View full text Add to dashboard Cite

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.

show abstract

Repurchases, Reputation, and Returns

Bonaimé¹

2012

J. Financ. Quant. Anal.

View full text Add to dashboard Cite

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.

show abstract

Not All Buybacks are Created Equal: The Case of Accelerated Stock Repurchases

Cited by 9 publications

References 0 publications

The Causes and Consequences of Accelerated Stock Repurchases

The Causes and Consequences of Accelerated Stock Repurchases

Accelerated Share Repurchases

Repurchases, Reputation, and Returns

Contact Info

Product

Resources

About