Dutch Auction Repurchases: An Analysis of Shareholder Heterogeneity

Laurie Simon Bagwell
Authors registered in the RePEc Author Service: Laurie Simon Hodrick

Journal of Finance, 1992, vol. 47, issue 1, 71-105

Abstract: This paper documents that firms face upward-sloping supply curves when they repurchase shares in a Dutch auction, and it analyzes the market reaction to these offers. The announcement price increase is highly correlated with the ultimate repurchase premium. Prices decline at expiration only for pro-rated offers. The cumulative return is positive and highly correlated with the repurchase premium, excepting pro-rated offers. Much of this price increase is consistent with movement along an upward-sloping supply curve. Trading volume around the Dutch auction parallels fixed-price repurchases. Supply elasticity is larger for firms with large trading volume, firms included in the S&P 500 Index, and takeover targets. Copyright 1992 by American Finance Association.

Date: 1992
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Citations: View citations in EconPapers (64)

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