Share Repurchases and Wealth Transfer Among Shareholders

38 Pages Posted: 10 Jun 2014

See all articles by Jared DeLisle

Jared DeLisle

Utah State University

Justin Morscheck

Gonzaga University

John R. Nofsinger

University of Alaska Anchorage

Date Written: June 1, 2014

Abstract

We estimate positive and significant wealth transfers from individuals to institutions following a share repurchase. It appears that institutional investors are informed shareholders that use share repurchases as an opportunity to magnify the effect of their informational advantage over individual investors. The firm’s share repurchase activity partially obscures the impact of the institutional trading and the ultimate change in ownership. This result is robust to an array of alternative methodologies. We find that institutions usually own a larger portion of the firm, relative to individuals, after a repurchase, even when they are net sellers. They simply sell less than individual investors. Thus, using net changes in ownership as a proxy for relative institutional investor demand can lead to false inference as to the relative informational advantage of institutional investors in quarters with significant repurchasing activity.

Keywords: stock repurchase, institutional investors, wealth transfer

Suggested Citation

DeLisle, Jared and Morscheck, Justin and Nofsinger, John R., Share Repurchases and Wealth Transfer Among Shareholders (June 1, 2014). Available at SSRN: https://ssrn.com/abstract=2448028 or http://dx.doi.org/10.2139/ssrn.2448028

Jared DeLisle

Utah State University ( email )

Logan, UT 84322
United States
435-797-0885 (Phone)

Justin Morscheck (Contact Author)

Gonzaga University ( email )

Spokane, WA
United States
509-313-7052 (Phone)

John R. Nofsinger

University of Alaska Anchorage ( email )

3211 Providence Drive
Anchorage, AK 99508
United States

HOME PAGE: http://faculty.cbpp.uaa.alaska.edu/jnofsinger/

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