Open Market Versus Tender Offer Share Repurchases: A Conditional Event Study

University of British Columbia, Finance Working Paper No. 98-2

Sauder School of Business Working Paper

34 Pages Posted: 11 Mar 1999 Last revised: 9 May 2012

See all articles by Kai Li

Kai Li

University of British Columbia (UBC) - Sauder School of Business; Asian Bureau of Finance and Economic Research (ABFER); China Academy of Financial Research (CAFR); European Corporate Governance Institute (ECGI)

William J. McNally

Wilfrid Laurier University - School of Business & Economics

Date Written: February 1, 1999

Abstract

This paper examines firms' choice of the repurchase program and the links between that choice, the determination of repurchase terms, and the announcement period price reaction. Our conditional event study shows that firms choose tender offers when they have greater financial slack and large shareholders who monitor management. Firms prefer open market repurchases in times of market turbulence or weak business conditions. Furthermore, we find that firms' choice of the repurchase program is systematically related to their determination of repurchase terms. The terms, in turn, affect the announcement period price reaction. Finally, our model predicts repurchase terms and the announcement period price reaction had an alternative repurchase program been employed, and results indicate that firms exhibit comparative advantage in their chosen repurchase programs.

JEL Classification: G14, G32, G35, C34, C11

Suggested Citation

Li, Kai and McNally, William J., Open Market Versus Tender Offer Share Repurchases: A Conditional Event Study (February 1, 1999). University of British Columbia, Finance Working Paper No. 98-2, Sauder School of Business Working Paper, Available at SSRN: https://ssrn.com/abstract=149513 or http://dx.doi.org/10.2139/ssrn.149513

Kai Li (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8353 (Phone)
604-822-4695 (Fax)

HOME PAGE: http://finance.sauder.ubc.ca/~kaili

Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

William J. McNally

Wilfrid Laurier University - School of Business & Economics ( email )

75 University Avenue
Waterloo, Ontario N2L 3C5
CANADA
519-884-0710 ext. 2793 (Phone)
519-884-0201 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,219
Abstract Views
5,553
rank
19,808
PlumX Metrics