Do Firms Buy Their Stock at Bargain Prices? Evidence from Actual Stock Repurchase Disclosures

66 Pages Posted: 25 Jan 2012  

Azi Ben-Rephael

Indiana University - Kelley School of Business - Department of Finance

Jacob Oded

Tel Aviv University - Faculty of Management

Avi Wohl

Tel Aviv University - Coller School of Management

Date Written: January 2, 2012

Abstract

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

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

Azi Ben-Rephael

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

HOME PAGE: http://www.kelley.iu.edu/finance/

Jacob Oded (Contact Author)

Tel Aviv University - Faculty of Management ( email )

Ramat Aviv
Tel-Aviv, 6997801
Israel

Avi Wohl

Tel Aviv University - Coller School of Management ( email )

P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 6409051 (Phone)

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