The Relative Signalling Power of Dutch-Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases

Robert Comment and Gregg A Jarrell

Journal of Finance, 1991, vol. 46, issue 4, 1243-71

Abstract: The authors compare three forms of common stock repurchases. Dutch-auction self-tender offers and open-market share repurchase programs are weaker signals of stock undervaluation than fixed-price self-tender offers. The price increase from buyback announcements is greater when insider wealth is at risk, greater following negative net-of-market stock returns, and unrelated to prior market returns. Buyback announcement returns are also increasing in the fraction of shares sought, which is consistent with both signaling and an upward-sloping supply curve for stock. Copyright 1991 by American Finance Association.

Date: 1991
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