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The effects of ownership and stock liquidity on the timing of repurchase transactions

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  • De Cesari, Amedeo
  • Espenlaub, Susanne
  • Khurshed, Arif
  • Simkovic, Michael

Abstract

We analyze detailed monthly data on U.S. open market stock repurchases (OMRs) that recently became available following stricter disclosure requirements. We find evidence that OMRs are timed to benefit non-selling shareholders. We present evidence that the profits to companies from timing repurchases are significantly related to ownership structure. Institutional ownership reduces companies' opportunities to repurchase stock at bargain prices. At low levels, insider ownership increases timing profits and at high levels it reduces them. Stock liquidity increases profits from timing OMRs.

Suggested Citation

  • De Cesari, Amedeo & Espenlaub, Susanne & Khurshed, Arif & Simkovic, Michael, 2012. "The effects of ownership and stock liquidity on the timing of repurchase transactions," Journal of Corporate Finance, Elsevier, vol. 18(5), pages 1023-1050.
  • Handle: RePEc:eee:corfin:v:18:y:2012:i:5:p:1023-1050
    DOI: 10.1016/j.jcorpfin.2012.06.004
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    References listed on IDEAS

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    Cited by:

    1. Drousia, Angeliki & Episcopos, Athanasios & Leledakis, George N., 2016. "Market Reaction to Actual Daily Share Repurchases in Greece," MPRA Paper 83039, University Library of Munich, Germany, revised 01 Aug 2017.
    2. Hossein Rezaie Dolatabadi & Fatemeh Faghani & Seyed Mehdi Tabatabaee, 2013. "Impact of Information Technology Development on Stock Market Development. Empirical Study in the World’s Leading Capital Markets," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 382-390, January.
    3. repec:ibn:ibrjnl:v:10:y:2017:i:5:p:1-12 is not listed on IDEAS
    4. Liu, Harrison & Swanson, Edward P., 2016. "Is price support a motive for increasing share repurchases?," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 77-91.
    5. Chen, Anlin & Lu, Cheng-Shou, 2015. "The effect of managerial overconfidence on the market timing ability and post-buyback performance of open market repurchases," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 234-251.
    6. De Ridder, Adri, 2015. "Additional evidence on the frequency of share repurchases and managerial timing," The Quarterly Review of Economics and Finance, Elsevier, vol. 56(C), pages 154-164.
    7. Andriosopoulos, Dimitris & Hoque, Hafiz, 2013. "The determinants of share repurchases in Europe," International Review of Financial Analysis, Elsevier, vol. 27(C), pages 65-76.
    8. Agarwalla, Sobhesh Kumar & Jacob, Joshy & Vasudevan, Ellapulli, 2013. "Market Timing Ability of Indian Firms in Open Market Repurchases," IIMA Working Papers WP2013-11-10, Indian Institute of Management Ahmedabad, Research and Publication Department.
    9. Bonaimé, Alice A. & Hankins, Kristine W. & Jordan, Bradford D., 2016. "The cost of financial flexibility: Evidence from share repurchases," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 345-362.
    10. Boudry, Walter I. & Kallberg, Jarl G. & Liu, Crocker H., 2013. "Investment opportunities and share repurchases," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 23-38.
    11. Lin, Ji-Chai & Stephens, Clifford P. & Wu, YiLin, 2014. "Limited attention, share repurchases, and takeover risk," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 283-301.

    More about this item

    Keywords

    Open market repurchase; Timing; Ownership; Liquidity;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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