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Abstract:
We examine the accuracy of various approximations of firms' repurchases of common stock used in previous studies, and find that decreases in shares outstanding as reported by CRSP and purchases of common stock and preferred stock (adjusted for changes in preferred stock) are good measures of actual repurchases. We also examine how characteristics such as option usage and the announcement of repurchase programs affect the measures. Compustat purchases of common and preferred stock (adjusted for the change in preferred stock) is the most accurate measure of actual repurchases, particularly for firms with high stock options. Further, the choice of proxy can significantly impact research results. Compustat purchases of common stock is the only estimate of actual repurchases that detects the positive relation between repurchases and employee stock options in a multivariate setting.

stock repurchases, methodology

Abstract:
We examine the accuracy of various estimates of firms' repurchases of common stock used in earlier studies, and find high error rates in the most commonly used estimators. We also find that the procedure used to estimate open market share repurchases can significantly impact results. The Compustat-based measure, which is the most accurate, deviates from the actual number of shares repurchased by more than 30% in about 16% of the cases. We conclude that many studies should be revisited now that the SEC mandates disclosure of precise information about share repurchases in Forms 10-Q and 10-K.

stock repurchases, share repurchases

Abstract:
This paper examines whether the cross sectional variation in Australian share prices is partially explained by measures of firm size and ownership characteristics in a manner that is consistent with firms behaving in accordance with Merton's (1987) model of capital market equilibrium with incomplete information. Based on a sample of firms whose shares were traded on the ASX during 1995, we show that firms largely owned by less wealthy shareholders tend to have low stock prices, although this relation is not linear. In addition, larger, better-known, firms tend to have higher stock prices. These findings are consistent with prior evidence from US markets, and suggest the existence of a shareholder clientele effect in Australia that is related to the share price of the underlying firm.

Abstract:
We investigate why firms pay a premium when making a tender offer to repurchase shares, and if the size of the premium is related to the elasticity of the supply curve for the firm's stock. We find that premiums on self-tender offers are related to characteristics of tendering firms, and to variables that are proxies both for the capital gains and for the information content of the announcement. Our results indicate that stock price inelasticity, caused by taxes, is an important determinant of offer premiums for fixed-price self-tender offers. We also find that the information conveyed by the offer, measured by the post-expiration appreciation of the firm's stock, is contained in the tender offer premium, and that offer premiums are inversely related to firm size and to preoffer stock performance. In addition, we present evidence that share repurchase tender offers may frequently be oversubscribed by design.

Abstract:
Illiquid common stock is worth less than stock that can be readily sold because the investor incurs an opportunity cost by being locked into the investment. Quantifying the amount of this illiquidity discount is an important issue in valuing certain common stock, especially for estate valuations. We examine whether a previously developed analytical model for valuing the lost "option to sell" when a stock is illiquid is a useful, practical tool for valuing illiquid common stock.

Equity Investments, Fundamental Analysis and Valuation Models, Alternative Investments, Other

Abstract:
Historically, reported trading volume has been overstated for NASDAQ stocks relative to NYSE stocks. Because NASDAQ volume may be overcounted, many researchers use an adjustment factor to make it comparable to NYSE volumes. Today, electronic communication networks account for about 75 percent of the trading volume for NASDAQ stocks. Many believe that the increased level of trading on ECNs and changes to the order-handling rules have lessened the discrepancy between the exchanges. To investigate, this study examined the relationship between reported trading volume to shares outstanding for a matched sample of NYSE and NASDAQ companies. The evidence indicates that the discrepancy has not diminished but widened.

Financial Markets: Market Structure and Organizations, Market Microstructure

Abstract:
Historically, trading volume reported for NASDAQ stocks has been overstated vis-a-vis New York Stock Exchange (NYSE) stocks, due both to the dealer's participation in trades as a market maker and to interdealer trading. Beginning in 1997, the Securities and Exchange Commission (SEC) changed order handling rules and trade reporting rules, which may have reduced or eliminated the overstatement of NASDAQ trading. We examine trading volumes of firms changing from NASDAQ to the NYSE since 1997 and document that reported trading volume for NASDAQ stocks continues to be overstated. Moreover, the degree of overstatement is much larger for firms with high trading volume.

Trading volume, market structure, NASDAQ, NYSE

Abstract:
We examine tick sizes, stock prices, and share turnover rates in stock markets across 18 developed countries and find that (i) differences in mandatory tick sizes explain a significant proportion of the variation in stock prices among markets, and (ii) lower percentage tick sizes are not associated with higher turnover.

We consider the implications of these findings for the recent decimalization of stock trading in the United States, and conclude that decimal trading is likely to result in lower stock prices (due to stock splits) with no substantial change in dollar trading volume.

Tick size, stock price level, trading volume, decimalization

Abstract:
We examine boards of directors of medical research charities and find that medical charities spend less on program activities and more on fund-raising when the executive director of the charity serves on the board of directors, especially when the board is small. Executive salaries are also higher at charities where management is represented on the board. Management and general expenses and fund balances are, however, unrelated either to the presence of an insider on the board or to the size of the board.

Corporate governance, boards of directors, nonprofit institutions

Abstract:
This paper examines issues that an expert witness must resolve in estimating economic damages in class action lawsuits involving publicly traded common stock. These issues include measuring the extent to which misleading information distorted the price of the stock, determining the actual volume of purchases by public investors, and adjusting for in-and-out trading during the Class Period.

Abstract:
We hypothesize that the initiation of cash dividends indicates that a firm?s earnings and cash flows have become fundamentally less risky. We present evidence to support this hypothesis. A sample of firms initiating dividends displays a precipitous decrease in risk immediately following the dividend announcement. Although these firms? earnings do not subsequently increase, earnings volatility is significantly lower following the dividend decision. We also find that the decrease in risk is related to the excess return observed around the dividend announcement.

Abstract:
Lotto players who win the jackpot must choose to receive their winnings as either an annuity or a lump sum. Students in an introductory finance class can determine the best alternative, applying their knowledge of present value and tax considerations to an interesting 'real world' financial decision. Using the current lottery in your state further piques the students' interest. The lump sum payment is taxed immediately, whereas the annuity payments are taxed when they are received. Analysis of a $6,000,000 jackpot shows the annuity netting the winner $686,899 more than the lump sum.

Abstract:
Trading volume for common stocks is of interest to financial economists, investors, and securities lawyers. NASDAQ is a dealer market where trades with dealers are included in reported trading volume. This procedure does not accurately measure the volume of trading by public buyers and sellers. Trading volume reported on the New York Stock Exchange (NYSE), which is primarily an auction market, provides a much closer measure of trades by public investors. We examine a sample of firms whose stock traded on the NASDAQ National Market System (NMS)and subsequently on the NYSE. When trading switches to the NYSE, the firms' trading volumes drop to about 50 percent of the volume previously reported on NASDAQ. A control group of firms that switch from the American Stock Exchange (AMEX) to the NYSE shows a small, but statistically insignificant, increase in trading volume.