Share repurchases: does frequency matter?

Adri De Ridder and Jonas Råsbrant

Studies in Economics and Finance, 2014, vol. 31, issue 1, 88-105

Abstract: Purpose - – The purpose of this paper is to examine differences in market performance of Swedish firms that initiate repurchase programs infrequently (1-2 programs), occasionally (3-4 programs) and frequently (5 or more programs) over the sample period and examine the relationship between abnormal return and repurchase size in repurchase months. Design/methodology/approach - – Standard event study methodology is used to detect abnormal return surrounding initiation announcements of repurchase programs. Ibbotson's RATS-methodology and the calendar-time portfolio methodology are used to estimate long-term abnormal performance. Findings - – The authors find differences in market performance of firms that initiate repurchase programs infrequently, occasionally and frequently. As with Jagannathan and Stephens, the authors find that infrequent repurchase programs are greeted with a stronger positive reaction than occasional and frequent programs. However, over long term, infrequent repurchase programs show no abnormal return, while occasional and frequent repurchase programs show a significant positive abnormal return. A positive relationship between abnormal return and repurchase size in repurchase months is documented on average for all types of repurchase programs. Originality/value - – By using the detailed data on repurchase activities, the authors are able to examine share repurchases with high precision and relate the performance to repurchase size. Since the duration of a repurchase program is pre-determined in Sweden, the authors are able to classify the programs by frequency and study market performance within the programs.

Keywords: Payout policy; Abnormal return; Frequency; Repurchase size; Share repurchases; Stockholm Stock Exchange (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eme:sefpps:v:31:y:2014:i:1:p:88-105

DOI: 10.1108/SEF-01-2013-0010

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