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Repurchase Tender Offers and Earnings Information
Larry Dann University of Oregon - Department of Finance Ronald W. Masulis Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - School of Law; University of New South Wales - Australian School of Business David Mayers University of California, Riverside - A. Gary Anderson Graduate School of Management Journal of Accounting and Economics, Vol. 14, pp. 217-251, 1991 Abstract: Announcements of stock repurchase tender offers are examined as a source of information to the market on the firm's future earnings prospects and market risk level. We find positive average earnings surprises and equity systematic risk reductions following tender offers but not, in most instances, preceding them. We find positive stock price reactions to tender offer announcements to be positively correlated with earnings surprises over the concurrent and subsequent two years, and negatively correlated with changes in equity and firm market risk. Finally, stock price reactions to quarterly earnings announcements are more strongly correlated with time-series based earnings surprises in the year prior to the tender offer than during the subsequent year, consistent with tender offer announcements conveying earnings information to the market.
Keywords: Tender offer, stock repurchase, earnings announcement, earnings surprise, systematic risk, beta JEL Classifications: G14, G32, G35, M41 Accepted Paper SeriesDate posted: August 11, 2006 ; Last revised: August 11, 2006Suggested CitationContact Information
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