Corporate Repurchase Decisions Following Mutual Fund Sales
Financial Management, Winter 2011, pp.973-999
43 Pages Posted: 16 Feb 2010 Last revised: 10 Oct 2013
Date Written: July 1, 2010
This paper examines managerial response to widespread selling by mutual funds. We study the effect on share repurchases of liquidity-based price pressure, measured by mutual fund transactions caused by capital outflows. Firms whose shares undergo widespread selling by funds experiencing large outflows are more likely to repurchase their own shares, controlling for the effect of returns on share repurchases. The empirical results suggest that firms act as buyers of last resort and provide price support for their own shares.
Keywords: Repurchases, liquidity, mutual fund flows, price pressure
JEL Classification: G35
Suggested Citation: Suggested Citation