Activist Investors and Open Market Share Repurchases
Posted: 27 Jul 2017 Last revised: 5 Sep 2019
Date Written: August 2019
This study examines the role of activist investors in firms’ decisions to conduct open market share repurchases. Compared with firms making ordinary share repurchases, firms making activist-involved repurchases have more cash holdings, are more undervalued, experience better subsequent stock performance and similar improvements in operating performance, and eventually repurchase more shares. Moreover, repurchasing firms in which an activist investor claims to take a passive role exhibit no undervaluation, and repurchasing firms that make multiple repurchases exhibit share undervaluation only in repurchases where an activist is involved. In all, our findings suggest that activist-involvement is associated with improved corporate repurchase decisions.
Keywords: Activist Investors, Open Market Share Repurchases
JEL Classification: G14, G23, G35
Suggested Citation: Suggested Citation