The relative signalling power of dutch-auction and fixed-price self-tender offers and open-market share repurchases
Article Abstract:
We compare three forms of common stock repurchases. Dutch-auction self-tender offers and open-market share repurchase programs are weaker signals of stock undervaluation than fixed-price self-tender offers. The price increase from buyback announcements is greater when insider wealth is at risk, greater following negative net-of-market stock returns, and unrelated to prior market returns. Buyback announcement returns are also increasing in the fraction of shares sought, which is consistent with both signalling and an upward-sloping supply curve for stock. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1991
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Equity undervaluation and decisions related to repurchase tender offers: an empirical investigation
Article Abstract:
Economic value is estimated using a model consisting of earnings-based valuation, and is then used to determine whether stock would be repurchased by managers who perceive the market value as less than the firm's economic value. Findings include a correlation between the tender premium and the level of undervaluation, that the level of undervaluation significantly influences the determination to satisfy oversubscription demand, and 74% of firms using fixed-price tender offers to repurchase stocks are undervalued compared to the preannouncement economic value.
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 2000
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The information content of share repurchase programs
Article Abstract:
A study examining findings, which are contrary to the payout theories, and which indicate that announcements of share repurchase programs are not followed by an increase in operating performance, is presented. Also, repurchasing firms experience reduction in systematic risk and cost of capital relative to non-repurchasing firms.
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 2004
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