Activist Investors and Open Market Share Repurchases

Posted: 27 Jul 2017 Last revised: 5 Sep 2019

See all articles by Don M. Autore

Don M. Autore

Florida State University - College of Business

Nicholas Clarke

Middle Tennessee State University - Department of Economics and Finance

Baixiao Liu

Peking University HSBC Business School

Date Written: August 2019

Abstract

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

Autore, Don M. and Clarke, Nicholas and Liu, Baixiao, Activist Investors and Open Market Share Repurchases (August 2019). Journal of Banking and Finance, Vol. 107, No. October, 2019, Available at SSRN: https://ssrn.com/abstract=3008889 or http://dx.doi.org/10.2139/ssrn.3008889

Don M. Autore (Contact Author)

Florida State University - College of Business ( email )

821 ACADEMIC WAY, Room 314 RBA
P.O. Box 3061110
Tallahassee, FL 32306-1110
United States
850-644-7857 (Phone)

Nicholas Clarke

Middle Tennessee State University - Department of Economics and Finance ( email )

Murfreesboro, TN 37132
United States

Baixiao Liu

Peking University HSBC Business School ( email )

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