Voluntary Disclosures Regarding Open Market Repurchase Programs

52 Pages Posted: 27 Aug 2014 Last revised: 25 Mar 2020

See all articles by Leonce Bargeron

Leonce Bargeron

University of Kentucky - Gatton College of Business and Economics

Alice A. Bonaime

University of Arizona

Mei Feng

University of Pittsburgh - Katz Graduate School of Business

Shawn Thomas

University of Pittsburgh - Katz Graduate School of Business

Date Written: December 1, 2017

Abstract

This paper examines firms’ voluntary disclosures regarding open market repurchase programs, i.e., announcements that firms have suspended, resumed, or completed repurchases. Abnormal returns around announcements are, on average, positive when firms voluntarily announce repurchase resumptions or completions with new authorizations but negative when firms announce repurchase suspensions or completions without new authorizations. These findings indicate that these voluntary disclosures contain important value-relevant information and also that investors expect repurchase programs, once initiated, to continue, implying less managerial flexibility in repurchases than previously thought. We find that voluntary disclosures about repurchase programs are also informative about subsequent repurchase activities. Firms that voluntarily disclose repurchase suspensions are significantly more likely to ultimately complete their current repurchase programs and initiate new repurchase programs than firms that could have voluntarily announced suspensions but did not. Consistent with voluntary disclosures of such bad news helping firms to establish reputations for repurchase transparency, firms voluntarily disclosing repurchase suspensions experience larger positive average abnormal returns around subsequent repurchase authorizations. We also exploit a change in mandatory reporting requirements for repurchases to document that voluntary updates are generally more informative when there are fewer mandatory disclosures regarding repurchase activities.

Keywords: Voluntary disclosure; Payout policy; Share repurchases; Payout flexibility

JEL Classification: G35, M41

Suggested Citation

Bargeron, Leonce and Bonaime, Alice A. and Feng, Mei and Thomas, Shawn, Voluntary Disclosures Regarding Open Market Repurchase Programs (December 1, 2017). Available at SSRN: https://ssrn.com/abstract=2486843 or http://dx.doi.org/10.2139/ssrn.2486843

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

Mei Feng

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

Pittsburgh, PA 15260
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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