Stock repurchases and liquidity

Alexander Hillert, Ernst Maug and Stefan Obernberger

Journal of Financial Economics, 2016, vol. 119, issue 1, 186-209

Abstract: We analyze the impact of share repurchases on liquidity based on a new comprehensive data set of realized share repurchases in the US, which covers 50,204 repurchase months between 2004 and 2010. Using instrumental variable analysis, we show that repurchases unequivocally improve liquidity and suggest that endogenous controls have confounded results in earlier studies. Liquidity also influences how firms execute repurchase programs. Repurchases provide liquidity when other investors sell the firm's stock or in times of crisis. No evidence exists that firms reduce liquidity when they trade on private information.

Keywords: Share repurchases; Market microstructure; Liquidity; Limit order markets; Informed trading (search for similar items in EconPapers)
JEL-codes: G10 G30 G35 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X15001488
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:119:y:2016:i:1:p:186-209

DOI: 10.1016/j.jfineco.2015.08.009

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().