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

See all articles by Evan Dudley

Evan Dudley

Queen's University - Smith School of Business

Ani Manakyan Mathers

Salisbury University - Department of Economics and Finance

Date Written: July 1, 2010

Abstract

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

Dudley, Evan and Mathers, Ani Manakyan, Corporate Repurchase Decisions Following Mutual Fund Sales (July 1, 2010). Financial Management, Winter 2011, pp.973-999. Available at SSRN: https://ssrn.com/abstract=1552111 or http://dx.doi.org/10.2139/ssrn.1552111

Evan Dudley

Queen's University - Smith School of Business ( email )

Goodes Hall
Kingston, Ontario K7L 3N6
Canada

Ani Manakyan Mathers (Contact Author)

Salisbury University - Department of Economics and Finance ( email )

Salisbury, MD 21801
United States

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