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The Timing and Source of Long-Run Returns Following Repurchases

Published online by Cambridge University Press:  21 April 2017

Leonce Bargeron ,
Alice Bonaime  and
Shawn Thomas
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Abstract

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This paper investigates the timing and source of anomalous positive long-run abnormal returns following repurchase authorizations. Returns between program authorization and completion announcements are indistinguishable from 0. Abnormal returns occur only after completion announcements. Long-run returns are largely attributable to announcement returns at subsequent authorizations and takeover attempts; that is, anomalous post-authorization returns are not persistent drifts but rather step functions. These findings have important implications for prior papers examining this most persistent and widespread anomaly. Further, our results serve to refocus the search for a rational explanation for the anomaly on subsequent repurchase announcements and takeover bids.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 52 , Issue 2 , April 2017 , pp. 491 - 517
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2017 

Footnotes

1

We thank Matt Billett, David Denis, Diane Denis, Amy Dittmar, Jesse Ellis, Gustavo Grullon (the referee), Kristine Hankins, Jarrad Harford (the editor), Brad Jordan, Kathy Kahle, Jason Karceski, Andrew Koch, Manoj Kulchania, Yelena Larkin, Jacob Oded, Marios Panayides, Michael Ryngaert, Jared Smith, and seminar participants at the 2013 American Finance Association Meeting, the University of Kentucky, and the University of Pittsburgh for helpful comments and suggestions. Elements of this paper circulated previously under the title “Returns over the Life-Cycles of Open Market Repurchases.” We also thank Di Kang, Ahmet Kurt, Tom Shofi, and Lilong Tao for research assistance. Any errors remain our own.

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