Abstract

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)

Chander Shekhar


University of Melbourne; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Jin San Kim


affiliation not provided to SSRN

September 28, 2010

21st Australasian Finance and Banking Conference 2008 Paper

Abstract:     
This study examines the choice between accelerated share repurchase (ASR) and open market repurchase (OMR) as repurchase mechanisms between 2004-2007. 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, lower cash, but higher managerial entrenchment. Prior to repurchase a similar proportion of ASR and OMR actually receive takeover bids, although ASR firms are subject to more takeover rumors. This latent likelihood of a takeover along with entrenchment and undervaluation affects the choice to use ASRs. ASR firms experience positive average abnormal returns both around and after the announcement. Subsequently however neither type experiences improved operating performance. Compared with pre-announcement activity, a significantly higher proportion of ASR and OMR firms continue to be subject to takeover rumors and bids. Our results suggest that choosing ASR over OMR and the resulting positive market reactions does little to decrease a firm’s attractiveness as a potential takeover target.

Number of Pages in PDF File: 39

Keywords: Stock Repurchase, Takeovers, Firm Performance, Signaling

JEL Classification: G30, G35

working papers series


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Date posted: August 25, 2008 ; Last revised: September 29, 2010

Suggested Citation

Akyol, Ali C. and Shekhar, Chander and Kim, Jin San, The Causes and Consequences of Accelerated Stock Repurchases (September 28, 2010). 21st Australasian Finance and Banking Conference 2008 Paper. 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

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

Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Jin San Kim
affiliation not provided to SSRN ( email )
Feedback to SSRN


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