Open Market Share Repurchases: What the Actual Trades Tell us Regarding the Completion Rates and Risk
45 Pages Posted: 28 Feb 2010 Last revised: 14 Nov 2011
Date Written: February 1, 2010
This paper investigates the announcement of intention to repurchase shares in the open market and the respective actual repurchase trades. We find that firms repurchase on average 74% of the intended amount of shares. In addition, size, leverage and dividend yield have a positive relationship with the completion rate of repurchase programme, contrary to the initiation lag and ownership concentration which have a negative relationship. We document that repurchasing firms experience a significant decline in systematic risk when the repurchase trades are executed, not when announcing the intention to repurchase. Finally, Fama-French regressions and the decomposition of firms’ total risk in systematic and idiosyncratic risk confirms our findings on risk changes.
Keywords: Share repurchases, information asymmetry, market timing, price support, firm risk, completion rate, actual trades
JEL Classification: G14, G32, G34, G35
Suggested Citation: Suggested Citation