Voluntary Disclosures Regarding Open Market Repurchase Programs
52 Pages Posted: 27 Aug 2014 Last revised: 8 Dec 2017
Date Written: December 1, 2017
This paper examines firms’ voluntary disclosures regarding open market repurchase programs, i.e., announcements that firms have suspended, resumed, or completed repurchases. We find that abnormal returns around announcements are, on average, positive when firms voluntarily announce repurchase resumptions or completions with new authorizations and negative when firms announce repurchase suspensions or completions without new authorizations. These findings suggest that the voluntary disclosures are informative and that investors expect repurchase programs to continue, implying less managerial flexibility in repurchases than previously thought. Companies are more likely to provide status updates when the updates are more informative to investors and when companies have stronger incentives to establish reputations for transparency. Consistent with benefits to reputations for transparency, firms voluntarily disclosing repurchase suspensions experience greater abnormal returns around subsequent repurchase authorizations.
Keywords: Voluntary disclosure; Payout policy; Share repurchases; Payout flexibility
JEL Classification: G35, M41
Suggested Citation: Suggested Citation