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Actual Share Reacquisitions in Open-Market Repurchase Programs

Author

Listed:
  • Clifford P. Stephens

    (Department of Finance, University of Missouri,)

  • Michael S. Weisbach

    (Department of Finance, University of Arizona)

Abstract

Unlike Dutch auction repurchases and tender offers, open-market repurchase programs do not precommit firms to acquire a specified number of shares. In a sample of 450 programs from 1981 to 1990, firms on average acquire 74 to 82 percent of the shares announced as repurchase targets within three years of the repurchase announcement. We find that share repurchases are negatively related to prior stock price performance, suggesting that firms increase their purchasing depending on its degree of perceived undervaluation. In addition, repurchases are positively related to levels of cash flow, which is consistent with liquidity arguments. Copyright The American Finance Association 1998.

Suggested Citation

  • Clifford P. Stephens & Michael S. Weisbach, 1998. "Actual Share Reacquisitions in Open-Market Repurchase Programs," Journal of Finance, American Finance Association, vol. 53(1), pages 313-333, February.
  • Handle: RePEc:bla:jfinan:v:53:y:1998:i:1:p:313-333
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    References listed on IDEAS

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