Share Repurchase Decisions and Market Reaction: Accounting, Information Asymmetry, and Investment Opportunities

Posted: 23 Sep 1996

See all articles by Mary E. Barth

Mary E. Barth

Stanford University - Graduate School of Business

Ron Kasznik

Stanford Graduate School of Business

Date Written: September 1996

Abstract

We test whether firms announce share repurchases and the announcement conveys good news, when firms have accounting assets reflecting less of firm value and high general information asymmetry, and bad news when firms have no attractive investment opportunities and idle cash. Proxies for accounting and idle cash are significantly positively related to share repurchase likelihood; general information asymmetry proxies are significantly negatively associated. Returns tests support the accounting and general information asymmetry hypotheses, but not the idle cash hypothesis. Findings are consistent with firms using repurchases to convey firm value not reflected in accounting assets, and the market reacting accordingly.

JEL Classification: G14, M41, G32, G35

Suggested Citation

Barth, Mary E. and Kasznik, Ron, Share Repurchase Decisions and Market Reaction: Accounting, Information Asymmetry, and Investment Opportunities (September 1996). Available at SSRN: https://ssrn.com/abstract=2755

Mary E. Barth (Contact Author)

Stanford University - Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-723-9040 (Phone)
650-725-0468 (Fax)

Ron Kasznik

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
650-725-9740 (Phone)
650-725-6152 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
2,821
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information