66 Pages Posted: 25 Jan 2012
Date Written: January 2, 2012
Using new data we investigate open-market repurchase execution of S&P 500 firms. We find that smaller firms repurchase less frequently than larger firms, and at prices which are significantly lower than average market prices. Their repurchase activity is followed by a positive and significant abnormal return which lasts up to three months after the repurchase. These findings do not hold for large S&P 500 firms. Consistent with these findings, we show that the market response to the disclosure of actual repurchase data is positive and significant only for small firms, and that insider trading is positively related to actual repurchases.
Keywords: Stock Repurchases, Stock Buybacks, Payout Policy, Timing, Bid-Ask Spread, Liquidity, Insider Trading
JEL Classification: G14, G30, G35
Suggested Citation: Suggested Citation
Ben-Rephael, Azi and Oded, Jacob and Wohl, Avi, Do Firms Buy Their Stock at Bargain Prices? Evidence from Actual Stock Repurchase Disclosures (January 2, 2012). Available at SSRN: https://ssrn.com/abstract=1991091 or http://dx.doi.org/10.2139/ssrn.1991091