stock buybacks

stock buybacks - Academic Studies: Stock Buybacks Share...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Academic Studies: Stock Buybacks Share Repurchase Motives and Stock Price Reactions (Cudd, Duggal, Sarkar) 1. Other studies analyzed repurchase motives based on the content of public repurchase announcements, acknowledging that actual motivations may differ. 2. Other studies rely on implied motives from market behavior or financial statement changes. 3. This paper conducted a confidential questionnaire with CFOs who recently conducted buybacks: a. Confidentiality. b. Several months later, so sensitivity to immediacy should have declined. 4. Findings: Repurchases conducted for control reasons (e.g., increasing insider holdings, defending against takeover attempt) are positively related to changes in stockholder wealth. 5. Six possible motivations: a. Dividend substitution. b. Leverage. c. Employee stock options. d. Lack of available investment alternatives. e. Signalling management’s favorable information. f. Wealth transfer between stockholders and bondholders. 6. Wansley-Lane-Sankar study reports findings: a. All respondents agree with signaling hypothesis. b. Managers disagree with repurchase actions being motivated by a low stock price or because manager’s insider ownership is down. 7. Dann study (1981) reports abnormal stock price increases in response to stock repurchase announcement.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
8. Bartov (1991) finds that repurchase announcement returns are positively correlated with the earnings changes conveyed by repurchase announcements.
Background image of page 2
Actual Share Reacquisitions in Open-Market Repurchase Programs (Stevens and Weisbach) 1. Open market repurchase programs have become increasingly popular and represent 90 percent of all the dollar value of all repurchase programs. 2. But how many shares are actually repurchased? 3. Media reports argue that actual buybacks are small relative to firms’ announced intentions, suggesting that the announcement is merely a way to raise firm’s stock price. 4. We conclude that the popularity of these programs is due to the inherent flexibility of these programs with respect to the timing and quantity (and price) of actual purchases. 5.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/16/2010 for the course FBE 421 at USC.

Page1 / 8

stock buybacks - Academic Studies: Stock Buybacks Share...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online