An Analysis of SEC Guidelines for Executing Open Market Repurchases

Douglas O. Cook, Laurie Krigman and J. Chris Leach
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Douglas O. Cook: University of Mississippi
Laurie Krigman: Babson College
J. Chris Leach: University of Colorado

The Journal of Business, 2003, vol. 76, issue 2, 289-316

Abstract: Rule 10b-18 is the only guidance the Securities and Exchange Commission provides for open market stock repurchases. Fashioned as a safe harbor without disclosure, 10b-18 conformity is unverifiable with public data. We use privately disclosed data to document claimed and actual compliance. While the level of compliance is relatively high, only two firms in our sample consistently comply for all repurchases. Even firms that publicly declared compliance violate the safe harbor's bounds. We document that violations of the safe harbor are more likely to occur following price declines. Our investigation questions the regulatory effectiveness of safe harbors without mandatory disclosure.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:76:y:2003:i:2:p:289-316

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