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http://ssrn.com/abstract=1252922
 
 

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The Causes and Consequences of Accelerated Stock Repurchases


Ali C. Akyol


University of Melbourne - Department of Finance; Financial Research Network (FIRN)

Jin San Kim


Kyungpook National University - School of Business Administration

Chander Shekhar


University of Melbourne; Financial Research Network (FIRN)

April 7, 2014

International Review of Finance, Forthcoming

Abstract:     
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.

Number of Pages in PDF File: 40

Keywords: Stock Repurchase, Takeovers, Firm Performance, Signaling

JEL Classification: G30, G35

Accepted Paper Series


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Date posted: August 25, 2008 ; Last revised: April 30, 2014

Suggested Citation

Akyol, Ali C. and Kim, Jin San and Shekhar, Chander, The Causes and Consequences of Accelerated Stock Repurchases (April 7, 2014). International Review of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1252922 or http://dx.doi.org/10.2139/ssrn.1252922

Contact Information

Ali C. Akyol
University of Melbourne - Department of Finance ( email )
198 Berkeley Street
Faculty of Economics and Commerce
Carlton VIC 3010, Victoria 3010
Australia
+61 (3) 8344-5318 (Phone)
+61 (3) 8344-6914 (Fax)
HOME PAGE: http://www.aliakyol.com
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Jin San Kim
Kyungpook National University - School of Business Administration ( email )
Sankyuk-dong, Puk-ku
Daegu, 702-701
Korea, Republic of (South Korea)
Chander Shekhar (Contact Author)
University of Melbourne ( email )
Melbourne, Victoria 3010
Australia
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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