Open-Market Share Repurchase Programs and Bid-Ask Spreads on the NYSE: Implications for Corporate Payout Policy

James M. Miller and John J. McConnell

Journal of Financial and Quantitative Analysis, 1995, vol. 30, issue 3, 365-382

Abstract: This study analyzes bid-ask spreads surrounding announcements of open-market share repurchase programs for a sample of 248 announcements of repurchase programs by NYSE firms over the period January 1984 through June 1988. The sample includes 158 announcements of new programs and 90 announcements regarding continuations of already existing programs. Contrary to the theory that spreads increase surrounding the announcement of open-market share repurchase programs, with both univariate and multivariate tests that control for changes in volume, changes in stock price volatility, and changes in the level of stock price, we find no evidence of an increase in spreads surrounding announcements of open-market share repurchase programs.

Date: 1995
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