An Analysis of Sec Guidelines for Executing Open Market Repurchases

50 Pages Posted: 23 Apr 2001  

Douglas O. Cook

University of Alabama - Culverhouse College of Commerce & Business Administration

Laurie Krigman

Babson College

J. Chris Leach

University of Colorado at Boulder - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: April 9, 2001

Abstract

Rule 10b-18 is the only guidance the SEC provides for open market stock repurchases. Fashioned as a safe harbor without disclosure, 10b-18 conformity is unverifiable with public data. We use privately disclosed data to document claimed and actual compliance. While the level of compliance is relatively high, only 2 of 54 firms in our sample consistently comply for all repurchases. Even firms that publicly declared compliance violate the safe harbor's bounds. We document that violations of the safe harbor are more likely to occur following price declines. Our investigation questions the regulatory effectiveness of safe harbors without mandatory disclosure.

Keywords: Repurchases, Safe Harbors, Disclosure

JEL Classification: G00, G38, G35

Suggested Citation

Cook, Douglas O. and Krigman, Laurie and Leach, J. Chris, An Analysis of Sec Guidelines for Executing Open Market Repurchases (April 9, 2001). Available at SSRN: https://ssrn.com/abstract=267054 or http://dx.doi.org/10.2139/ssrn.267054

Douglas O. Cook

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Business
Tuscaloosa, AL 35487-0223
United States
205-348-8971 (Phone)
205-348-0590 (Fax)

Laurie Krigman (Contact Author)

Babson College ( email )

Finance Division
325 Tomasso Hall
Babson Park, MA 02457-0310
United States
781-239-4246 (Phone)
781-239-5004 (Fax)

J. Chris Leach

University of Colorado at Boulder - Department of Finance ( email )

Campus Box 419
Boulder, CO 80309-0419
United States
303-492-5665 (Phone)
303-492-5962 (Fax)

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