A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchase and Dividends

Ahron R. Ofer and Anjan Thakor ()
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Ahron R. Ofer: Northwestern University/Tel Aviv University

Finance from University Library of Munich, Germany

Abstract: This paper develops a model in which managers can signal their firms' true values by using either a dividend or a stock repurchase or both. The authors explain a number of sylized facts about these cash- disbursement mechanisms, particularly those concerning the relative magnitudes of stock price responses to dividends and repurchases. Most importantly, they explain why a stock repurchase elicits a significantly higher price response, on average, than a dividend announcement.

JEL-codes: G (search for similar items in EconPapers)
Pages: 31 pages
Date: 2004-11-11
New Economics Papers: this item is included in nep-fin
Note: Type of Document - pdf; pages: 31
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: A Theory of Stock Price Responses to Alternative Corporate Cash Disbursement Methods: Stock Repurchases and Dividends (1987)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0411031

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