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Do firms buy their stock at bargain prices? Evidence from actual stock repurchase disclosure

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  • Ben-Rephael, Azi
  • Oded, Jacob
  • Wohl, Avi
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    Abstract

    We use new data from SEC filings to investigate how S&P 500 firms execute their open market repurchase programs. We find that smaller S&P 500 firms repurchase less frequently than larger firms, and at a price which is significantly lower than the average market price. Their repurchase activity is followed by a positive and significant abnormal return which lasts up to three months after the repurchase. These findings do not hold for large S&P 500 firms. Our interpretation is that small firms repurchase strategically, whereas the repurchase activity of large firms is more focused on the disbursement of free cash. --

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    Bibliographic Info

    Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2011/17.

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    Date of creation: 2011
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    Handle: RePEc:zbw:cfswop:201117

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    Related research

    Keywords: Stock Repurchases; Stock Buybacks; Payout Policy; Timing; Bid-Ask Spread; Liquidity;

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