The Relative Signalling Power of Dutch-Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases
The authors 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 signaling and an upward-sloping supply curve for stock. Copyright 1991 by American Finance Association.
Volume (Year): 46 (1991)
Issue (Month): 4 (September)
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