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The Timing and Source of Long-Run Returns Following Repurchases

51 Pages Posted: 23 Oct 2013 Last revised: 23 Jul 2015

Leonce Bargeron

University of Kentucky - Gatton College of Business and Economics

Alice A. Bonaime

University of Arizona

Shawn Thomas

University of Pittsburgh - Katz Graduate School of Business

Date Written: July 18, 2015

Abstract

This paper investigates the timing and source of anomalous positive long-run abnormal returns following repurchase authorizations. Returns between program authorization and completion announcements are indistinguishable from zero. Abnormal returns occur only after completion announcements. Long-run returns are largely attributable to announcement returns at subsequent authorizations and takeover attempts, i.e., anomalous post-authorization returns are not persistent drifts but rather step functions. These findings have important implications for prior papers examining this most persistent and widespread anomaly. Further, our results serve to refocus the search for a rational explanation for the anomaly on subsequent repurchase announcements and takeover bids.

Keywords: Share repurchases, Long-run performance, Market efficiency

JEL Classification: G14, G35

Suggested Citation

Bargeron, Leonce and Bonaime, Alice A. and Thomas, Shawn, The Timing and Source of Long-Run Returns Following Repurchases (July 18, 2015). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2343913 or http://dx.doi.org/10.2139/ssrn.2343913

Leonce Bargeron

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States
859-257-4397 (Phone)

Alice A. Bonaime

University of Arizona ( email )

Eller College of Management
Department of Finance
Tucson, AZ 85721
United States

Shawn Thomas (Contact Author)

University of Pittsburgh - Katz Graduate School of Business ( email )

246 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1648 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~shthomas/index.htm

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