The Effects of Ownership and Stock Liquidity on the Timing of Repurchase Transactions
59 Pages Posted: 12 Jul 2011 Last revised: 26 Aug 2012
Date Written: June 6, 2012
We analyze detailed monthly data on U.S. open market stock repurchases (OMRs) that recently became available following stricter disclosure requirements. We find evidence that OMRs are timed to benefit non-selling shareholders. We present evidence that the profits to companies from timing repurchases are significantly related to ownership structure. Institutional ownership reduces companies’ opportunities to repurchase stock at bargain prices. At low levels, insider ownership increases timing profits and at high levels it reduces them. Stock liquidity increases profits from timing OMRs.
Keywords: open market repurchase, timing, ownership, liquidity
JEL Classification: G35, G38
Suggested Citation: Suggested Citation