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A Test for Price Pressure Effects in Tender Offer Stock Repurchases

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  • Davidson, Wallace N, III
  • Chhachhi, Indudeep
  • Glascock, John L

Abstract

The evidence in this paper supports the hypothesis that the previously documented stock price reversal following a tender offer announcement is consistent with a price pressure caused by a temporary shift in the security's demand curve. The authors came to this conclusion by redocumenting the price reversal, by finding an increase in trading volume around the tender offer announcement and expiration, by showing the increase in volume to be larger than expected from only an information effect, and by showing that short selling activity increases after the announcement and before the expiration of the tender offer. Copyright 1996 by MIT Press.

Suggested Citation

  • Davidson, Wallace N, III & Chhachhi, Indudeep & Glascock, John L, 1996. "A Test for Price Pressure Effects in Tender Offer Stock Repurchases," The Financial Review, Eastern Finance Association, vol. 31(1), pages 25-49, February.
    • Handle: RePEc:bla:finrev:v:31:y:1996:i:1:p:25-49
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    Cited by:

    1. Lo, Keng-Hsin & Wang, Kehluh & Liao, Tsai-Ling, 2006. "Insider transfer trading of banking companies around exchange listing," Journal of Financial Intermediation, Elsevier, vol. 15(2), pages 215-234, April.
    2. Nekat, Kai & Nippel, Peter, 2007. "The impact of a firm's payout policy on stock prices and shareholders' wealth in an inefficient market," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 619, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.

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