Motives for Multiple Open-Market Repurchase Programs

Murali Jagannathan and Clifford Stephens

Financial Management, 2003, vol. 32, issue 2

Abstract: We examine differences in motives, firm characteristics, market performance, and subsequent operating performance of firms that repurchase shares frequently versus firms that repurchase only occasionally or infrequently. Frequent repurchasers are much larger, have significantly less variation in operating income, and higher dividend payout ratios. Infrequent repurchases are made by smaller firms with more volatile operating income, lower institutional ownership, lower market-to-book ratios and high degrees of asymmetric information. Although most repurchases are viewed favorably by the market, infrequent repurchases receive a much stronger positive reaction. Finally, we find little evidence of improved operating performance following repurchase announcements.

Date: 2003
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