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Stock Repurchases in Canada: Performance and Strategic Trading

  • David Ikenberry

    (Rice University,)

  • Josef Lakonishok

    (University of Illinois and the National Bureau of Economic Research,)

  • Theo Vermaelen

    (INSEAD and Maastricht University)

During the 1980s, U.S. firms announcing stock repurchases earned favorable long-run returns. Recently, concerns have been raised over the robustness of these findings. This concern comes at a time of explosive growth in repurchase programs. Thus, we study new evidence from the 1990s for 1,060 Canadian repurchase programs. Moreover, because of Canadian law, we can carefully track repurchase activity monthly. Similarly to the situation in the United States, the Canadian stock market discounts the information in repurchase announcements, particularly for value stocks. Completion rates in Canada are sensitive to mispricing. Trades also appear linked to price movements; managers buy more shares when prices fall. Copyright The American Finance Association 2000.

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Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 55 (2000)
Issue (Month): 5 (October)
Pages: 2373-2397

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Handle: RePEc:bla:jfinan:v:55:y:2000:i:5:p:2373-2397
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  1. Spiess, D. Katherine & Affleck-Graves, John, 1995. "Underperformance in long-run stock returns following seasoned equity offerings," Journal of Financial Economics, Elsevier, vol. 38(3), pages 243-267, July.
  2. Ikenberry, David & Lakonishok, Josef & Vermaelen, Theo, 1995. "Market underreaction to open market share repurchases," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 181-208.
  3. Mark L. Mitchell & Erik Stafford, 1997. "Managerial Decisions and Long-Term Stock Price Performance," CRSP working papers 453, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  4. Loughran, Tim & Ritter, Jay R., 2000. "Uniformly least powerful tests of market efficiency," Journal of Financial Economics, Elsevier, vol. 55(3), pages 361-389, March.
  5. Vermaelen, Theo, 1981. "Common stock repurchases and market signalling : An empirical study," Journal of Financial Economics, Elsevier, vol. 9(2), pages 139-183, June.
  6. Loughran, Tim & Ritter, Jay R, 1995. " The New Issues Puzzle," Journal of Finance, American Finance Association, vol. 50(1), pages 23-51, March.
  7. Ibbotson, Roger G., 1975. "Price performance of common stock new issues," Journal of Financial Economics, Elsevier, vol. 2(3), pages 235-272, September.
  8. 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, 02.
  9. Lakonishok, Josef & Vermaelen, Theo, 1990. " Anomalous Price Behavior around Repurchase Tender Offers," Journal of Finance, American Finance Association, vol. 45(2), pages 455-77, June.
  10. Raghavendra Rau, P. & Vermaelen, Theo, 1998. "Glamour, value and the post-acquisition performance of acquiring firms," Journal of Financial Economics, Elsevier, vol. 49(2), pages 223-253, August.
  11. Merton, Robert C., 1985. "On the current state of the stock market rationality hypothesis," Working papers 1717-85., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  12. Womack, Kent L, 1996. " Do Brokerage Analysts' Recommendations Have Investment Value?," Journal of Finance, American Finance Association, vol. 51(1), pages 137-67, March.
  13. David L. Ikenberry & Theo Vermaelen, 1996. "The Option to Repurchase Stock," Financial Management, Financial Management Association, vol. 25(4), Winter.
  14. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
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