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Repurchase Tender Offers and Earnings InformationLarry DannUniversity of Oregon - Department of Finance Ronald W. MasulisUniversity of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN) David MayersUniversity 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.
Number of Pages in PDF File: 50 Keywords: Tender offer, stock repurchase, earnings announcement, earnings surprise, systematic risk, beta JEL Classification: G14, G32, G35, M41 Accepted Paper SeriesDate posted: August 11, 2006Suggested CitationContact Information
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