Mandatory Disclosure and Firm Behavior: Evidence from Share Repurchases
Alice A. Bonaime
University of Kentucky
April 24, 2013
Using the 2004 change in Rule 10b-18 of the 1934 Securities Exchange Act, which requires enhanced disclosure of repurchase transactions, this paper examines whether mandatory disclosure affects corporate behavior. Results are consistent with a significant increase in open market repurchase completion rates (the amount of stock repurchased as a percentage of the announced amount) from the low disclosure period to the high disclosure period and with changes in completion rates being negatively related to information asymmetry. Heckman bivariate models control for the potential sample selection bias (i.e., firms likely to have low completion rates may refrain from announcing a repurchase program, especially in an enhanced disclosure environment) and show that completion rates are between 12.3 and 16.5 percentage points higher after the regulatory change. These results are consistent with accounting standards that mandate new disclosures eliciting change in corporate behavior.
Number of Pages in PDF File: 34
Keywords: Disclosure, transparency, information asymmetry, share repurchases, share buyback, repurchase completion rate, cost of capital
JEL Classification: G35, G38, G14, G30, M40, K22working papers series
Date posted: April 6, 2010 ; Last revised: April 26, 2013
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