Market Microstructure Changes Around Accelerated Share Repurchase Announcements

43 Pages Posted: 25 Jun 2012

See all articles by Manoj Kulchania

Manoj Kulchania

Wayne State University - Finance Group

Date Written: June 15, 2012

Abstract

We investigate the impact on trading characteristics of firms when they announce share repurchases using a relatively new buyback method - Accelerated Share Repurchases (ASRs). We find that trading costs decrease and market quality improves following an ASR announcement. The improvement in liquidity is not accompanied by significant changes in information asymmetry or price volatility. Multivariate tests show that the change in volatility and the presence of price constraints in the ASR agreement are significant in explaining the changes in spreads, but the reasons given by firms for conducting the ASRs are not. Thus, in the case of ASRs, the announced involvement of an investment bank buying shares on behalf of the firm improves liquidity without significantly affect the level of information asymmetry.

Suggested Citation

Kulchania, Manoj, Market Microstructure Changes Around Accelerated Share Repurchase Announcements (June 15, 2012). Journal of Financial Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2091776 or http://dx.doi.org/10.2139/ssrn.2091776

Manoj Kulchania (Contact Author)

Wayne State University - Finance Group ( email )

2771 Woodward Ave
Detroit, MI 48201
United States
313-577-7837 (Phone)

HOME PAGE: http://ilitchbusiness.wayne.edu/profile/fr3472

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