On the Timing and Execution of Open Market Repurchases
Douglas O. Cook
University of Alabama - Culverhouse College of Commerce & Business Administration
J. Chris Leach
University of Colorado at Boulder - Department of Finance
Little is known about the timing and execution of open market repurchases. U.S. firms are under no obligation to disclose when they are trading, and generally report only quarterly changes in shares outstanding. We use 64 firms' supplementally disclosed repurchase trading data to provide the first examination of repurchase timing and execution. Across the days reported in our sample, firms adopted a variety of execution styles ranging from immediate intense repurchasing to delayed and smoothed repurchasing. We find no clear evidence that repurchases are timed to coincide with, precede, or follow, days on which information is released. Within a given repurchase day, we find u-shaped repurchase patterns for NYSE firms and end-of-day repurchasing tendencies for Nasdaq firms. We benchmark the costs and value of a given repurchase program against naive accumulation strategies achieving the same terminal portfolio. While there is considerable variation across the firms, NYSE firms on average beat their benchmarks whereas Nasdaq firms do not. Finally, we document the liquidity impact of open market repurchases. We find that repurchasing contributes to market liquidity by narrowing bid-ask spreads on days when repurchase trades are completed.
Number of Pages in PDF File: 47
Keywords: Repurchases, Timing
JEL Classification: G35working papers series
Date posted: March 13, 2001
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