A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchase and Dividends
AbstractThis paper develops a model in which managers can signal their firms' true values by using either a dividend or a stock repurchase or both. The authors explain a number of sylized facts about these cash- disbursement mechanisms, particularly those concerning the relative magnitudes of stock price responses to dividends and repurchases. Most importantly, they explain why a stock repurchase elicits a significantly higher price response, on average, than a dividend announcement.
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Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0411031.
Length: 31 pages
Date of creation: 11 Nov 2004
Date of revision:
Note: Type of Document - pdf; pages: 31
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- Ofer, Aharon R & Thakor, Anjan V, 1987. " A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends," Journal of Finance, American Finance Association, vol. 42(2), pages 365-94, June.
- G - Financial Economics
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